Indiscriminate spending, impulse buying, discretionary purchases - these are the buzzwords of the consumer society. Advertising, peer-group pressure and the desire to see something immediate in return for long hours of work have lifted our spending on items we don't really need to dizzying heights.

Trouble is, when the big-ticket items need financing - things such as a home, an investment portfolio, children's education and a comfortable retirement - the wallet is bare, so is the bank account, and many have overspent their way into debt.

Saving for what you want by putting away a little each week or month is a much more difficult proposition than just pulling out the plastic.

Finding something extra to put away each week can come in one of two ways - increase your income or reduce your expenses - says Millennium Financial Planning director Laura Menschik.

The first is usually out of your control, but most people can find ways to reduce their expenses. The key is to use a household budget, Ms Menschik says.

"A budget will allow you to cover your essential expenses, reduce unnecessary discretionary spending and turn that into savings for long-term goals," she says.

A budget will also help you cope with unexpected expenses. The more modest your income, the more important a budget is, says Margaret Kilby, joint coordinator of Ryde Eastwood Financial Counselling Service in New South Wales.

"People on a low income have less flexibility in their spending patterns," Ms Kilby says. "For a low-income earner, a large bill, for example, can precipitate a financial crisis." Budgeting can help them to meet the payments and avoid the crisis.

Retirees on reduced incomes are in a similar position, says Peter Richards, managing director of PKF Financial Services.

A budget is simply a forecast of earnings and expenses over a given period - weekly, fortnightly, monthly or annually - set down as a document, which you can use as a basis to guide your future spending patterns.

There are two parts to it. The first is income, which may be wages or salary, income from business activities, shares or trust distributions, capital gains from asset sales, or social security payments.

On the other side is expenditure. This includes fixed costs such as food, transport, petrol, rent or mortgage payments and childcare, and also fixed periodic costs such as council rates, utility bills, or insurance premiums. Then there are discretionary costs such as holidays, travel and entertainment, which tend to vary over time.

When preparing a budget, the actual figures you use should be based on what you have spent in the past, taken from receipts and bank statements. Or they can be a "guesstimate".

After all the entries have been made, income and expenses are totalled separately and expenses are deducted from income. If there is an amount left over, this is how much you have to save. If expenditure exceeds income, this shows how much you are going into debt.

With this reckoning of your spending patterns, you can look at ways of cutting back on spending. PKF Financial Services' Peter Richards recommends a realistic approach: "There's no point restricting yourself to a spartan lifestyle, because you won't stick to it," he says.

Don't eliminate necessities such as insurance, but cutting back on things like cigarettes, alcohol, expensive restaurants, takeaway foods, cosmetics and gambling expenses should be considered.

What you remove from your expenditure list can then go towards increasing your savings or reducing your debt.

You now have a budget you can work with.

It's then up to you to keep to the budget. You do this by monitoring your spending patterns - keeping records such as receipts and credit-card and bank statements - and regularly comparing what you have spent with what is in the budget. This needs to be done at the end of every month (if you are budgeting monthly) for the first few months.

The budget itself will also need to be reviewed periodically. "Most people initially underestimate how much they spend by about 15 to 20 per cent, says Mr Richards. "They tend to forget about gifts, spending on pets, and on servicing the car, for example." So the budget may need to be changed to make it more realistic.

Or there may be changes in your circumstances - new costs associated with children, for example. Even if things stay more or less unchanged, the budget should be reviewed at least once a year, says Ryde Eastwood Financial Counselling's Margaret Kilby.

Most people can construct a basic budget in an hour so. Books on financial planing usually contain a sample budget that you can use or adapt. Or you can get a budget form from a financial planner.

For homes with computers, personal finance software packages have become increasingly popular tools for doing the family budget. Two well-known programs on the market are Quicken (about $79.95) and Microsoft Money (about $59.95). Both are designed for the Windows platform only (Quicken for the Macintosh has been discontinued). These programs come with categories already set up so that all you have to do is enter your figures and they automatically do the calculations for you.

They save time and paperwork, and provide flexibility in designing budgets, says Patrick Kelly, senior marketing manager at Reckon, which distributes Quicken in Australia.

"You can forecast potential changes to your circumstances - income from a second job or extra expenses incurred in having family for example - and see how they would affect the bottom line. You can create separate budgets for specials purposes - for the Christmas periods or a holiday period, for example," he says.

These programs allow you to create graphs and reports that can illustrate how well you are keeping to the budget, and how your income and expenses change month to month, for example.

These programs can also be used to flag work-related expenditures, information that can be useful when preparing your tax returns.

They have other features that aren't related to budgeting but which can be helpful in managing other areas of your finances, such as allowing you to monitor bank accounts and track assets such as shares and other investments, including super balances. And they can track your liabilities such as investment loans and home mortgages.

They can use loan planners to calculate the effects of increasing or decreasing your repayments and the effects of changes in interest rates.

They have calendars that remind you when bills are due and automatically update accounts to take into account regular payments such as salary.

Although Microsoft Money is cheaper, Quicken is the more popular product (it has sold about half a million copies in Australia, according to the company). As budgeting tools, the two are very similar. In certain areas, though, Quicken is clearly better adapted for Australian conditions, especially in taxation.

For example, Quicken's tax reports are designed to be consistent with TaxPack, and it can handle things such as calculation of franking credits on share dividends, which Money cannot do. But if you decide to switch to Money from Quicken, Money has an "import Quicken" function that lets you do it seamlessly without having re-enter all your data.

One drawback of both programs is that most of the data needed to keep reports and accounts current has to be keyed in by hand, which is a time-consuming practice. But this is slowly changing. Both Money and Quicken are linked with the websites of the big banks so you can automatically update your account balances by clicking a button.

Indeed, the Internet is becoming increasingly integrated with programs such as Quicken and Money. Money has links to the financial pages of the Ninemsn website, and Quicken users can download share prices automatically from www.quicken.com.au, which also offers company data and analysis, business news, and a discount share-broking facility called Quick.Broker.

Dialling in and downloading data involves additional hardware - you must have a modem - and you need to have an account with an Internet service provider (ISP). This will cost between $20 and $50 a month, depending on your usage, plus the cost of a local call every time you dial up to the site.

If you are connected to the Internet and don't need the other features that Money and Quicken offer, some websites have basic budgeting tools available for free that you might find useful. Moneymanager (moneymanager.com.au), managed by Fairfax, which owns The Age, has a useful free monthly electronic budget. The site also has access to articles from The Age, The Sydney Morning Herald and other Fairfax publications. It also offers interest-rate tables, share-price data, and tax calculators.

The Channel Nine Money section of the Ninemsn site, www.ninemsn.com.au also has a five-step electronic budget sheet. If you register with the site, you can save your budget for comparison or updating at a later date. Registration is free. The site also contains comparisons of prices, bank fees and interest rates, stock prices, online share trading and tax-return preparation tips.

Some of the banks also have online budget planners on their websites. For example, the ANZ at www.anz.com.au has a monthly online planner and calculator.

Not everyone is going to find the Internet or software useful, says Millennium's Laura Menschik. If you're not a computer user, you might prefer working out a budget on paper. And these programs can't take the place of advice from a qualified financial planner, she says.

Whether you use pen and paper, the Internet, or a software package, you will still need to be disciplined about monitoring your spending and sticking to the budget to get the benefits. "That's the hardest part," says Peter Richards.