How to get leak hammer to work?

[Floater]

I did that, hammer opens and everything, but it said something like:

ERROR: Failed to initialize materials file system. Gamedir=, Moddir=

in the messages window, and if i open or make a new VMF it comes up with the 'Hammer has encountered a problem and needs to close' error.

[Essel]

You need to set your game directories and stuff in the options menu.