Go out into your yard and dig a big hole. Every month, throw $50 into it, but don't take any money out until you're ready to buy a house, send your child to college, or retire.

It sounds a little crazy, doesn't it? But that's what investing without setting clear-cut goals is like. If you're lucky, you may end up with enough money to meet your needs, but you have no way to know for sure.

Setting investment goals means sitting down and defining your dreams for the future. If you are married or in a long-term relationship, spend some time together discussing your joint and individual goals. You can do this on your own or with the help of a financial advisor. It's best to be as specific as possible. For instance, you know you want to retire, but when? You know you want to send your child to college, but to an Ivy League school or to the community college down the street?

You'll end up with a list of goals. Some of these goals will be long term (you have more than 15 years to plan), some will be short term (5 years or less to plan), and some will be intermediate (between 5 and 15 years to plan). You can then decide how much money you'll need to accumulate and which investments can best help you meet your goals.

After a hard day at the office, do you ask, "Is it time to retire yet?" Retirement may seem a long way off, but it's never too early to start planning--especially if you want retirement to be the good life you imagine.

Let's say that your goal is to retire at age 65 with $500,000 in your retirement fund. At age 25 you decide, with the help of an investment advisor, to begin contributing $250 per month to your tax-deferred 401(k) account. If your investment earns 6 percent per year, compounded monthly, you'll have more than $500,000 in your investment account when you retire.

But what would happen if you left things to chance instead? Let's say that you're not really worried about retirement, so you wait until you're 35 to begin investing. Assuming you contributed the same amount to your 401(k) and the rate of return on your investment dollars was the same, you would end up with only about half the amount you need.

Some other points to keep in mind as you're setting specific retirement investment goals:

• Determine how much money you'll need in retirement: Many experts say that you'll need about 75 to 85 percent of your current income to maintain your standard of living
• Plan for a long life: According to life expectancy charts, you can expect to live for 15 to 20 years past retirement, assuming you retire at age 65
• Think about how much time you have until retirement, then invest accordingly: For instance, if retirement is a long way off and you can handle some risk, you might choose to invest in stock or equity mutual funds that, though more volatile, offer a higher potential for long-term return than do more conservative investments
• Consider how inflation will affect your retirement savings: When determining how much you'll need to save for retirement, don't forget that the higher the cost of living, the lower your real rate of return on your investment dollars

Perhaps you faced the ugly truth the day your child was born. Or maybe it hit you when your child started first grade: You only have so much time to save for college. In fact, for many people, saving for college is an intermediate-term goal--if you start saving when your child is in elementary school, you'll have 10 to 15 years to build your college fund. Of course, the earlier you start the better. The more time you have before you need the money, the greater chance you have to build a substantial college fund due to compounding. With a longer investment time frame and a tolerance for some risk, you might also be willing to put some of your money into investments that offer the potential for growth.

Consider these tips as well:

• Estimate how much it will cost to send your child to college and plan accordingly: Estimates of the average future cost of tuition at two-year and four-year public and private colleges and universities are widely available (or ask your financial advisor for information)
• Research financial aid packages that can help offset part of the cost of college: Although there's no guarantee your child will receive financial aid, at least you'll know what kind of help is available should you need it
• Look into state-sponsored tuition plans that put your money into investments tailored to your financial needs and time frame: For instance, most of your dollars may be allocated to growth investments initially, then later as your child approaches college, into more conservative investments to conserve principal
• Think about how you might resolve conflicts between goals: For instance, if you need to save for your child's education and your own retirement at the same time, how will you do it?

At some point, you'll probably want to buy a home, a car, or the yacht that you've always wanted. Although they're hardly impulse items, large purchases are usually not something for which you plan far in advance--one to five years is a common time frame.

Because you don't have much time to invest, you'll have to budget your investment dollars wisely. Rather than choosing growth investments, you may want to put your money into less volatile, highly liquid investments that have some potential for growth, but that offer you quick and easy access to your money should you need it.