Identify your financial goals
The first step in this process of developing a financial plan is to identify and prioritize your personal financial goals. This is a very critical step and takes some soul searching. Items that you may want to consider include your retirement, college education for your children, a new home, a new car, an expensive vacation, a new business, etc. Also, don't forget about emergency savings plans.
Obviously, your goals will also depend greatly on your age and your circumstances. If you are young and just starting out, then your goals will be much different than those of your parents or grandparents, but they also will have goals.
Proper planning requires that you address all of your goals even if they won't occur for 40 years. You will consider your long-term goals (up to 20 years or longer) as well as your short-term (up to 5 years) and mid-term goals (up to 10 years). This means that you will also have to identify the time frame associated with each of your goals. In identifying your goals, be as specific as possible. For example, don't write down "college savings for the kids", but rather include a specific entry for each of the children.
You can grab a piece of paper and write down your goals, as well as a timeframe and an amount to save, or you can print our goal worksheet. It provides blanks for the names of the goals (be specific), a target date (month and year should be sufficient), and a target amount. For those of you with Microsoft Excel, you can use our planning workbook.
The most important thing is to identify your goals now before you begin the other steps in this planning process. Once you start identifying the real cost of your goals, we don't want you to eliminate goals, but rather reprioritize them or change the target dates and amounts.
Once you have completed your goal worksheet, you can proceed to the next step.
Step Two - Gather Information