You can’t use your money to get what you want if you don’t know what you want. Sounds like a no-brainer, doesn’t it? The funny thing is, this is the only thing about money that’s actually harder than it looks. Most people never put the required effort into figuring out what they really want from their life and their money.

Setting goals allows you to choose where you want to go in life. Once you know where you want to go, you can draw a map of how you plan on getting there. And, once you know how to get there, you can figure out where the milestones are, so you’ll always know how far you’ve come and how far you still have to go.

Goal setting isn’t just for financial goals, of course. Use the following steps to think about all of your hopes and dreams. Afterward, we’ll get back to the role money plays in reaching them.

Step 1: Brainstorm

Get out a sheet of paper and a pencil. Spend 10 minutes writing down everything you can think of that you would like to achieve someday. Here are some thought starters:

Step 2: Choose Your Destinations

Put the paper away. Let it sit for a day or two. Work through the rest of the sections on the list of What Everyone Should Have. Pull your list back out and give it a long, hard look.

• Revise the list. Add goals you forgot, and delete things that don’t look so important after all. You probably didn’t think of a safety net, for example, and other goals may have occurred to you in the process.
• Prioritize your final list. If it’s a goal you really can’t live without, put it on the A list. If it’s important, but not absolutely necessary, make it a B. And those things that you’d like, but aren’t really as important, should be labeled C.

Step 3: Draw Maps

Look at just your A list. Don’t throw the others out. You’ll work with them later.

Take out another sheet of paper. Draw three columns on it. Label the first column, "What," the second column, "When," and the third, "How Much." At the top of the first column, write the first goal on your A list. When do you want to have achieved this goal? Write the date in the second column. If the goal will cost money, put a price tag on it. Write the cost at the top of the third column.

Break the goal into a series of smaller goals. If your goal is a comfortable retirement, what do you need to have saved in 40 years? In 30? Work backward, down to what you will need to save toward retirement this month. If your goal is to become a great cook, you might list a series of courses you’d like to take, when you can take them, and how much they’ll cost each. Remember, not all goals require money: becoming a great cook might include reading cookbooks borrowed from the library, or even earning money as an apprentice caterer.

• Repeat Step 3 for each of the goals on your A list, then for the goals on your B list and your C list.

Step 4: Go!

• Get your budget worksheet back out. Is the amount left over at the end of the month large enough to cover the plans on at least your A list? Yes? You’re on your way! No? Don’t despair. You haven’t been blown off the map: you’re just on a detour. First look at how you’ve prioritized your goals. Can the goals on the B and C lists be postponed? Can you work toward them more slowly? Then go to the next section to learn some ways of bringing your budget more in line with your plans.