(Article by Kathy Kristof, Money Magazine, February 1998)

What prevents millions of American families from attaining their financial goals? They fail to write them down, says Gerri Detweiler, financial lecturer and author of The Ultimate Credit Handbook. "A goal without a plan is nothing more than a dream," says Detweiler. She adds that it doesn't matter whether your goal is retirement at 60 or a four-day trip to Disney World next December. "If you want to turn it into a plan, you have to write it down."

Setting your goals to paper is the first, and arguably most important, step in creating a financial plan. And, experts note, having a financial plan is pivotal to becoming financially healthy. Indeed, a survey of 1,770 households commissioned by the Consumer Federation of America and NationsBank found that families who had a written financial plan saved and invested about twice as much as those who didn't.

"We used to stress simply the importance of saving," says Stephen Brobeck, executive director of the Consumer Federation of America in Washington, D.C. "But as the result of our research, we now realize that planning itself leads to increased savings."

While setting goals appears to be simple, many people get tripped up by one of three goal-setting mistakes:

1. Setting goals that are either so vague or so unrealistic that they can never be realized
2. Allowing somebody else - whether a financial planner or a spouse - to tell you what you need, rather than your determining what you want
3. Or simply refusing to commit your goals to writing. That makes it difficult to determine where the goals are realistic and hampers your ability to create an action plan

So, how do you do it right? With a pencil and a notebook. If you're married, two of each. Married couples need to jot down their goals individually and then compare notes, since husbands and wives often have different top priorities or view about when they want particular things, says Madelyn O'Connell, president of Catalyst Financial Planning & Investment Management in Oakland.

Devote one page to short-term goals - things you want to happen within five years - and another for long-term goals. Rank and put a price tag on each. In other words, if your most important short-term goal is going out to dinner once a week, place it first on your list and estimate its cost - say, $50 for dinner and $25 for babysitting for a a total of $75 a week. Is your No. 2 goals buying a new car soon? Jot that down, and figure the cost of the down payment plus monthly outlays.

Placing a price tag on long-term goals is trickier because you must account for inflation. If you know what a goal costs in today's dollars, though, use a multiplier (table below) or a financial calculator to adjust its cost for inflation.

Odds are your long-term goals include paying for college and retiring at a certain age. For today's key college figures, see the September issue of Money; the December 1997 issue's Idea of the Month column provides retirement planning assistance.

When you're through with the goal-ranking process, you may find you have more wants than means. Don't give up. Your next step is to eliminate goals you can't afford from the bottom of your list, economize on some of the things you've listed, or both. In addition, you might consider adjusting your lifestyle - by working overtime or finding a more lucrative job - to get it all.

"If you have a lot of goals and not enough money, you need to set priorities," says Detweiler. "You might buy a less expensive house. Or postpone some goals. Perhaps you'll have to work a little longer before retiring." Just don't postpone savings for all your long-term goals. That could one day turn them into infeasible short-term goals.