1. What are your goals and objectives?

The first step in developing a solid savings and investment plan is to decide what you want your money to do for you. When you think about your financial goals, it's important to be as specific as you can. That's because choosing an investment without a specific goal in mind is a little like packing for a vacation before you know whether you're going to Alaska or Hawaii.

Start by making a simple list of all your financial goals. By identifying and prioritizing your goals—such as buying a new home, paying college tuition for your children, and funding a comfortable retirement—you can help ensure that the investments you select are appropriate to help you achieve each of your goals. Click here for more information on financial planning

2. What is your time frame?

How long do you have until you'll need your money? Setting time frames for each of your goals is key because it can help determine how long your money can be working for you. Some of your goals, like saving for a vacation, may be short term and less than 4 years away. Others, such as funding college or saving for retirement, may be longer term and more than 10 years away. That's why it's important to remember that an investment which may be appropriate in helping you achieve a longer-term goal may not work as effectively for those that are shorter term. Determining a time frame for each of your goals will guide you as you select your investment options.

Regardless of your age or how much money you have to invest, your chances of reaching your goal will be much greater if you start today to build your financial future. That's because the sooner you start investing, the less money you may need to invest and the longer your money has to grow.

3. How much money do you have?

Before you make any decisions about investing, you need to assess where you are currently relative to where you want to be. Begin by taking a "financial inventory" to determine how much money you have to invest and how your other assets are already allocated. Don't forget to consider assets such as:

• equity in your home, if you own one
• pension benefits and 401(k)assets
• individual retirement accounts and
• other personal savings and investments, including life insurance and annuities

Remember, your total financial situation may dictate a more conservative or aggressive strategy and is a key factor in influencing the types of investments that are most appropriate for reaching each of your goals.

4. How much money do you need?

Quantifying your financial goals—in other words, determining how much money you'll need in the future—is important because it can help determine how much money you'll need to put aside now to accomplish your goals. Say you want to accumulate $100,000 for a future goal. The type of investment you select and your time frame will substantially impact the amount of money you'll need to begin saving for your goal.

5. What kind of investor are you?

Along with determining your financial goals and your time frame, you'll want to also consider what type of investor you are—in other words, what is your risk tolerance? No matter what type of investment you select, there are certain risks and potential rewards associated with it. Depending on the amount of time you have until you need your money, some of those risks may be more acceptable than others. If you're like many investors, you may invest more conservatively for your shorter-term goals and more aggressively when your goals are farther into the future. Click here for more information on online investing