By Dan Timotic, CFA

When was the last time you planned a vacation? Did you just “wing it” by going to the airport and hopping on whatever flight was available? Of course not. It would be crazy just to show up without knowing where you were going or for how long. Most likely, you sat down with your family and figured out your budget. You researched airfares, hotels and local attractions. You decided when you were going and when you would return. You planned a vacation.

If you spent so much time planning a vacation that lasts a week, shouldn’t you spend at least as much time planning your retirement that could last over 20 years? Financial planning is the process of determining how you will spend your retirement. It’s your choice whether you want to spend your retirement on a beach in Florida or working part-time at a grocery store in Minnesota (not that there is anything wrong with Minnesota, but it’s pretty cold up there). (For more, see: How Soon Should I Start Saving for Retirement?)

Research has shown that the vast majority of wealth is created by careful planning, budgeting and investing. Set a goal, make a plan to reach that goal, then work hard to make it happen. The sooner you identify your goals, the more likely you are to achieve those goals.

Effective planning helps you organize your financial life. It assists you in identifying your financial resources and your financial priorities. The process will help you get a complete understanding of your retirement funding sources, identify additional savings strategies and help you figure out if you will have the money to maintain the standard of living you want. With the right plan in place to fit your life, you will have the confidence in knowing you are on track to meet your retirement goals.

With a little planning, you can save for retirement and still take care of your other financial responsibilities. An important first step is to understand where your money is going. If you’re not sure, track your spending for a couple of months. This will help you create a budget that finds money for retirement.

When you start saving may be even more important to your success than how you invest. Thanks to the power of compounding, time is your biggest friend when it comes to saving. Even small amounts, saved regularly, add up over time. It’s never too late to start but the sooner you start, the greater the benefit.

Know yourself and make decisions based on your goals, number of years you have to invest and how much risk you are comfortable taking. Then allocate your money across asset classes and stay diversified. (For more, see: What is the Size of the Average Retirement Nest Egg?)

It’s easy to get sidetracked. Your options are limited if you come up short for retirement and Social Security will not be enough. Be willing to adjust and protect your retirement savings as your life changes.

Working with the right advisor can help immensely. A good advisor will help you identify all your goals and determine the appropriate risk/return balance. Equally important, your advisor is there to review, discuss and adjust your plan depending on life’s changes.

In today’s world of information overload, we feel the need for immediate gratification. Too many individuals take a short-term view of their investments, retirement, and just about everything else. With so much noise coming from the media, friends social networks, etc., it is understandable that individuals feel like they need to do something. But that something could be the worst thing for them if they don’t understand their goal.

Far too many times, individuals want to invest when things feel good and that generally means the markets are up. They also panic and sell when the markets are down. By definition, you are buying high and selling low. If you don’t have a plan in place with clear objectives, you will be reacting to your future needs instead of proactively applying a discipline to meet your future needs. The fear of the unknown can be overwhelming and force you to do things you normally wouldn’t do. So before you have any knee-jerk reactions, take the time to think about your future, create a plan, and work hard to reach your goals.

Be sure to keep in mind that your personal retirement plan should not be a “set it and forget it” plan. You should review your plan annually and make all necessary changes. The review will also allow you to adjust your investment allocations to meet life’s demands, portfolio values, retirement expectations, etc.

It may sound like a daunting task, but you don’t have to do it alone. With the help of a qualified advisor, you may even find the process to be much less stressful than you expected. After all, this is your future we’re talking about. Wouldn’t it be great to know that you are on the right track to fulfill your dreams and care for your family?

Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” Don’t end up with regrets in retirement just because you didn’t take the time to plan for your own future. A little effort today can go a long way. (For more, see: Retirement Planning in a Changing World.)

This article was originally published on Investopedia.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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