>So how and when do you start?
You start tomorrow morning, any later will be too late!
>How much money should you save up?
On the safe side 2+ years of income and expenses, if you are "feeling lucky", 6 months will do! I saved over 2 years of income and expenses, 6 months would have done, so I waited too long :(
>What programs or software should you buy?
A good HTML editor, a good FTP program (I like CuteFTP), a good "paint" program (I like PaintShopPro), a good accounting system (I like QuickBooks), a good credit card billing system (I like Authorize.net), some clients will want "Flash", for that I prefer Swish to Macromedia.
>What steps do you take to get a company name (do you just open up a checking account?)?
You need to Incorporate, you can do this online for typically less than $150. Then you need to open a checking account in the name of the company. You will probably need a business phone bill & Tin # to do this.
You will also need to pay your State fees for business registration and possibly register with the State/County for Intangible tax.
>how do you approach your first client? What documents do you provide and are there places to get these contracts on the Internet?
My first clients were people I already knew or people I was geographically close to. They had a need, I had a solution (low cost in those days), and it just went from there. Previous acquaintances are easier sales than "unknowns".
>What do you try to get them to sign at the proposal? Essentially, how do you do it?
You get them to sign a website development agreement and hosting agreement in the first instance. You might add an SEO agreement later.
If you have no experience of writing such agreements you might need an Attorney's help with this. If you are comfortable with contracts then there are many you can simply "steal" from other sources on the web and rewrite them accordingly.......probably still best to pass them by an Attorney before you present them to a prospective client!