How to set working/current directory in Vim?

Try adding set autochdir to your .vimrc. If you want to change it just this once, use :cd (or :cd! to force it).

Also if you are browsing the filesystem with the netrw file explorer you can set the current directory by pressing the c key.

Edit: for newer versions try cd if c doesn't work.

As already suggested, you can use autochdir, which will change to the directory of the file you opened, the other option is

:cd mydirectory

which will change the directory. This can be an absolute or relative path, so :cd .. will move up one level. Or you can use :cd %:h which will also change to the directory the current file is in, but without setting autochdir.

:cd

will change directory to your home directory (or on windows, print the current directory).

:cd -

will change the directory to the previous directory you visited.