"Even though I've started saving and investing on my own, I want to make sure I'm on my way to achieving goals in life. Can you show me how planning can pay off for me?"

Congratulations on getting started and thinking about your future. That's an important first step that too many people put off until it's almost too late! You already recognize the importance of saving and investing, but it's time to bring focus and direction to the work you've already begun. You need to engage in the financial planning process. The financial planning process is really quite simple in concept. It involves identifying goals, developing a strategic plan to help you reach them, and periodically reviewing your progress and making changes in your course if necessary. Some people even engage in the process on their own, although those with more complex financial situations usually find it pays off to seek professional advice. Read more about The Financial Planning Process, then take our Financial Planning Driving Test to find out how you're doing so far.

The Financial Planning Process Your Foundation for Smart Decision-Making

Step One - Information Gathering

Gather information about where you are today. You'll want to gather all of your current bank and investment statements, your budget if you have one, insurance policies, employee benefits statements and last year's tax returns. Then you need to assess your net worth. What do you own? What do you owe?

Step Two - Goal Setting

Next you need to decide where you want to go. What are your life goals? Where do you want to be in five years? Ten years? Twenty? Fifty? Do you want to fund the college education of your children? Grandchildren? Your own? When do you want to retire, and what kind of lifestyle do you want to lead during your retirement years? Do you want to leave a legacy for future generations of your family - or for your favorite charities? You need to ask yourself all of those questions and more to begin defining and prioritizing your goals.

Step Three - Identifying Barriers and Obstacles

Now that you know where you are and where you want to go, it's time to identify all the things that stand in the way between you and your dreams. Is your income too low at its current level to fund your short-term goals? Do you need to invest more - or more aggressively - to realize your dreams? Are you taking maximum advantage of asset allocation and diversification across asset classes?

Step Four - Developing a Written Financial Plan

The plan is your roadmap to your dreams. It's the culmination of all the work you've done so far - the information gathering, goal setting and critical thinking about barriers and opportunities. Now it's time to put what you've learned on paper and map out what actions you'll have to take to get where you want to go. Easier said than done? Maybe. You may want to consider consulting a professional financial adviser.

Step Five - Implementing Your Plan

Now that you've developed the roadmap, it's time to hit the road! Put your plan into action, and start working towards your dreams. If you decided you need to invest 10 percent of your salary each month for long-term growth (which, by the way, is not a bad idea), now's the time to do it. If you discovered you don't have enough insurance to cover potential loss, now's the time to select and purchase a policy. Whatever you do, don't let all the work you've done so far go to waste. Don't procrastinate! This is your life we're talking about here.

Step Six - Review and Revise Your Plan

No long road trip is without it's unforeseen delays and detours. It's critical that you periodically review your plan, chart your progress, and make changes in your course if necessary. You may discover that you need to rebalance your asset allocation to bring it back into your target range. Perhaps you need to push back your anticipated retirement age by a year or two. Or perhaps your goals and priorities have changed. Whatever your personal situation, it's wise to review your plan at least once a year and make revisions to keep on track to meet your goals.

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