Napoleon Hill said it best: "The person who labors without a definite purpose backed by a definite plan for its attainment resembles a ship without a rudder." Essentially, without a clear goal and a plan to achieve it, you're going to drift around aimlessly at sea. This applies to much more than money, but if you really want to break out of your bad financial habits you certainly need to set a concrete goal and embark on a plan to reach that goal.
The first step in personal financial planning is controlling your day-to-day financial affairs so that you can do the things that bring you satisfaction and help you reach your goals. This is achieved by planning and following a budget. Controlling spending, saving money, and investing for the future are all important aspects of financial planning, but those things mean nothing if you don't have specific goals that you're trying to reach. In order to gauge your financial success, you need to have goals so that you can measure your success. The second step in personal financial planning is choosing and following a course toward long-term financial goals.
The four steps to setting financial goals:
- Identify and write down your goals.
- Break goals down into short-term and long-term goals.
- Educate yourself.
- Evaluate your progress.