Throughout my university years I was a great saver. Living frugally, hunting around for great deals, and putting away something every month from my part-time job.

But as my income increased, everything went pear-shaped. I started eating out more, shopping online, dropping cash on concert tickets and weekends away. A little voice in my head would say, “it's fine, you have money, you earned it, spend it”.

I was practising the earn-spend-and-save-what’s-left strategy, but it just wasn't working. And sure enough, I started eating into my savings.

Because we all have a natural tendency to spend what we have, Morningstar director of personal finance Christine Benz says everyone needs a budget, regardless of age, life stage, or whether we think they've "made it" or not.

"The key point about a budget is that it helps ensure that your spending syncs up with your priorities," Benz says.

Setting up a budget is no one’s idea of fun. Instant gratification trumps prudent long-term money management. And of course, budgeting requires trade-offs. But a good budget that quietly works in the background is an essential first step to saving and growing your wealth.

For me, it helped me reflect on my spending, prioritise, and put money away where I wasn't tempted to spend it.

Over the next two articles in this series, we'll outline three popular budget strategies – Benz's 30-Minute Money Solutions budget, the 50/30/20 rule, and the Pay Yourself First rule, and– so you can pick a method best suited to your goals and personality. In part three, we'll share our picks for the best budgeting apps for iPhone and Android.

Christine Benz’s 30-Minute Money Solutions budget

Step 1: Enter your current fixed and variable expenses, as well as information about your sources of income, on the Budget Worksheet. For expenses and income sources that don't fit neatly into the categories provided, use the "other" lines.

Also record any savings that you're typically able to set aside each month.

Step 2: Start the budgeting process by scrutinising your variable (or discretionary) expenses over the past month(s). Because you have the most control over this set of costs, making adjustments here is the fastest way to improve your household's financial picture.

Be forward-looking as you evaluate your variable expenses. The data you've supplied about your income and spending provides a snapshot of the money you have coming in and going out. But your budget gives you a chance to shape your spending in accordance with your goals, both personal and financial.

Evaluating your variable expenses means being realistic. Just as dieters can't stick to the plan if it doesn't allow for the occasional piece of birthday cake or glass of wine, it's also unrealistic to plot out a budget with no room for the occasional movie or lunch with friends. Using your real past expenses as a template for your budget helps anchor you in reality.

If you anticipate expenses that are predictable but not necessarily monthly–such as holiday and birthday gifts–it's a good idea to distribute those costs throughout the year. Look back on the past year's worth of gift-giving, estimate your expenditures, and adjust downward or upward as you see fit. Then divide by 12 to arrive at your monthly budgeted amount.

Record your target expenditures for each line item in the Budget column on the Budget Worksheet.

Step 3: Next, turn your attention to your fixed expenses on the Budget Worksheet. Although household necessities are usually referred to as fixed costs, that's a bit of a misnomer. Yes, these items are necessities, but you may be able to adjust them somewhat. Among the areas where it's possible to reduce your fixed costs are:

  • Food
  • Clothing
  • Credit card interest rates (sometimes, but not always, negotiable)
  • Mortgage payments (if refinancing is an option)

Mobile phones, wireless internet, and paid TV - you may be able to change providers or negotiate a lower rate with your current provider, especially if you're purchasing more than one service.

Take note of the areas where you may be able to reduce your fixed costs and plan to follow up on them. If you can get reductions in these areas, adjust your budget accordingly.

Step 4: As you tweak your target expenditures, pay attention to how the changes affect your bottom line. Your goal should be not only to balance your household budget but also increase the amount you have earmarked for saving and investing each month.

Step 5: Finally, put in place a plan to regularly check your real-life spending versus your budget. Don’t create a budget and then leave it in the drawer.

Start by finding a place to record your household's expenses. Programs like Excel can help you track your expenses, but you can also track them with a pen and paper.

Next, block out time on your calendar each month (ideally, one hour per month over the next three to six months) to check up on your actual expenses versus your budget. If your first budget assumptions were unrealistic or if something material has changed in your household's financial picture, adjust your budget accordingly.

Excerpted with permission of the publisher John Wiley & Sons, Inc. from 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances. Copyright (c) MMX by Morningstar Inc.

Next week, we’ll examine the 50/30/20 rule.