What is the first step in financial planning?

The first step in financial planning is understanding what you want. This foundational phase involves setting clear and specific financial goals tailored to your personal aspirations and circumstances. By identifying your priorities, such as saving for a home, funding education, or preparing for retirement, you create a roadmap for your financial future. Understanding your desires helps guide your subsequent financial decisions and strategies, including budgeting, saving, and investing, thus making all other steps in the financial planning process more effective and aligned with your long-term vision. This clarity is essential before diving into specific tasks like expense logging or balance sheet preparation, as it ensures that your financial efforts are purpose-driven.