What is the first step in the financial planning process according to the basic steps of personal financial planning?

Defining your financial goals is the foundational step in the financial planning process because it sets the direction for all subsequent actions and decisions. This step involves identifying what you want to achieve financially, which can include short-term goals (like saving for a vacation), medium-term goals (like purchasing a home), and long-term goals (such as retirement planning).

By clearly articulating these goals, you create a benchmark against which your financial strategies can be measured. Additionally, having specific goals helps in prioritizing actions and resources, making it easier to assess your current financial situation and determine the actions required to move toward those goals. This clarity is essential before you can accurately evaluate your financial health, develop a detailed plan of action, or implement any strategies. Hence, defining financial goals is a critical first step that informs and shapes the overall financial planning process.