While there is no right or wrong way to plan a trip, this is the method I use
Step #1 - research
Choose a country you're interested in exploring, download a travel guide, and read it cover to cover. Take notes on the places that sound interesting, and perhaps Google some photos and reviews to ensure it's a place you'd want to see. Begin reading well over one year in advance, so you're never rushed. See my Future trip ideas page and you'll see what I mean.
Search for the best time of year to visit. Since we enjoy the outdoors, weather is always a factor. But prices and crowds are also a consideration. We usually choose the "shoulder seasons," or periods of time between the busy tourist season and the off season. Prices are cheaper, crowds are smaller, and weather is still pleasant. In Europe, for example, the shoulder seasons are Spring and Autumn.
Step #2 - creating aN Itinerary
Now you have a list of potential things you'd like to see and when you want to go. Great! How do you organize this into an itinerary?
Print a paper calendar of the month you've chosen to visit. I currently use Print-a-calendar. Consider your list of places and things to see, and try to determine how many days it would take to see each of them. Make notes of approximately how many days you'll want to spend at each town, city, or region.
Also look at a map, and try to "connect the dots" so to speak. In which order should you travel from place to place? Google maps can help locate train routes, airplane routes, or driving routes. We commonly fly in to one city and fly out of another, so we never concern ourselves with round-trip travel.
With an order of locations, and an estimate of how much time to spend in each, use a pencil and begin writing on the calendar. I occasionally get a bit overzealous and need to erase some locations or attractions due to length of time. Once you feel comfortable with your itinerary, it's time to investigate lodging and transportation.
step #3 - lodging
Now that you know which locations you'll be in and for how many nights, the next step is to find comfortable lodging. We use Tripadvisor for this, and search for bed & breakfasts or boutique hotels, like Villa Torretta (pictured). We enjoy smaller, historical lodging with some character. But find whatever feels comfortable for you.
Once you've located the perfect accommodations in the ideal location, search for the website and book directly online. If they don't have a website, keep searching until you find one that does. I figure if they want my business, they'll be online.
step #4 - transportation
With destinations and lodging confirmed, it's time to determine how to travel. You can usually purchase airline tickets up to one year in advance. You can reserve car rentals or purchase train passes in advance as well.
I use Kayak to search for flights, then locate the airline website and purchase tickets directly from them. For car rentals, I currently use Travelocity. Train tickets or passes will depend on where you're going. Hopefully your guide book covered this information. If not, simply Google "train tickets" for the country or region you plan to visit. I use Eurail for Europe.
With regards to lodging and transportation, I've developed a "pay as you go" method. If I need to pay in advance, I make one purchase every month or so until I've paid for everything. Slowly but surely, the trip is paid before we even board the plane. Pay for lodging first, then transportation. The perfect accommodation is normally more limited than, say, an airline, train, or rental car fleet.
step #5 - reserving activities or restaurants
This is an optional step, especially if you travel during the shoulder season. But if you're certain you want to enjoy a specific activity or restaurant, you can always reserve it in advance.
This is usually either free, or costs very little compared to the trip overall. Ensure you read their cancellation policy in case you're too tired to go or the weather is bad. This can be useful for popular attractions. Advance tickets allow you to skip the ticket lines. They also ensure you'll be able to enjoy an activity that may otherwise be booked or unavailable.
Researching locations can also help you discover if some are closed on certain days. If you only have one day to spend at the Louvre museum, and it's closed, can you imagine your disappointment?
You're done! Now you wait until your vacation arrives. These steps, along with my Travel tips, should make your trip much easier and more enjoyable. The hard work is done. Now you get to enjoy the fruits of your labors. Have fun, and go explore the world!