To some, financial planning sounds like an area best left to professionals. However, going through the planning process on your own can be extremely rewarding. As the first part of this article discussed, good financial plans come from a thorough understanding of your own goals and concerns. After you've figured out what those goals and concerns are, you'll be ready to formulate a specific plan and take action to implement it.

Your financial policy statement
Many professional financial planners excel in presenting a formal planning document complete with charts, graphs, and illustrations for your future reference. Specifically laying out all of your financial goals in order of priority in a plan of this sort will help you track your progress. To get started, you'll want a list of your current financial resources and obligations to put your financial situation in context. You should also provide some assumptions about the future, including anticipated returns on various types of investments, changes in your income and living expenses, and target dates for major life events such as retirement. Be realistic and conservative about these assumptions -- doing so will give you some leeway if things don't turn out as well as you had hoped. A plan that includes all of this information will be useful for you and for family members if something happens to you.

Making it work
After you come up with a written financial policy statement, the next step is to match your plan to particular actions you need to take. In most cases, this involves evaluating how much money you have to use toward meeting your goals and coming up with an investment strategy that will help you reach them. It's relatively easy to figure out how much you'll be able to put toward your goals each month simply by creating a budget of income and expenses.

Coming up with an investment strategy requires a bit more work. Some professional financial planners put the majority of their effort into providing excruciating detail on particular investments, but in most cases, you don't need to follow their example. Simple asset-allocation strategies using index-tracking exchange-traded funds, such as Vanguard Total Stock Market ETF (AMEX:VTI) and iShares Lehman 7-10 Year Treasury (AMEX:IEF), should give you returns roughly equal to the overall stock and bond markets. If, on the other hand, you agree with folks such as Foolish fund expert Shannon Zimmerman that actively managed mutual funds can beat the overall markets, then you may find that considering some of the fund allocations Shannon recommends in his Champion Funds newsletter may help you improve your returns. There's no one method that works best for everyone; it's very much a matter of tailoring your investment style to your particular temperament and needs.

Staying on track
Once you've figured out how you're going to reach your goals, you need to keep informed about how your plan is progressing. While this doesn't mean you need to check your portfolio values several times each day, it does mean reviewing your basic financial position occasionally to make sure that nothing unexpected has happened. In going over your finances, you'll find your written plan very helpful in seeing whether your assumptions and expectations actually proved to be correct. If you discover large discrepancies, you can make appropriate modifications to your plan to improve its chances of getting you to your goals successfully.

A big challenge in keeping your finances on track is identifying when things aren't going well, whether it's a budget that just doesn't work or an investment strategy that's keeping you up at night. However, you need to realize at the outset that your initial plan won't be perfect. By holding yourself accountable to continue making regular improvements to your financial plan as you go, you'll put yourself in the best position to reap the rewards later on.

Moreover, creating and managing your financial plan can show you areas of weakness where you can benefit from outside help. For instance, if you consistently panic during big market moves and sell out at exactly the wrong time, you might benefit from working with a financial planner who will impose some much-needed discipline on your trading. Even if you decide to rely on professionals for much of your financial planning, simply having gone through the exercise will be of great value.

Some people, on the other hand, will find that once they've done the work to put their own financial plan together, they're happier handling their finances on their own. With the confidence that creating and managing your financial planning brings, you're likely to reach the goals you set for yourself.

Related articles:

Financial planning can be a daunting task to take on by yourself, so it's nice to have a helping hand in your corner. The Fool's personal-finance service, Motley Fool Green Light, can give you the strength you need to face your financial challenges confidently and effectively. See how the service can help you with a free 30-day trial.

Fool contributor Dan Caplinger has done financial plans both for himself and for clients. The Fool's disclosure policy helps you plan.