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Balancing your checkbook is a really simple, easy task, but it takes lots of discipline and order. Doing it monthly can save you from frustrating, not to mention expensive situations, such as overdraft charges, mistakes, and fraudulent activity if your account is ever compromised.
You’ll be able to accurately answer questions like: Did I spend too much on groceries this month? Am I paying too much on utilities? Are there any extra charges on my account that I’m unaware of? Keeping accurate records of your transactions will allow you to become familiarized in how you handle your finances and will let you hold yourself accountable for irresponsible purchases.
Where to start?
First, you need to understand that your bank statement and your checkbook register will not always have the same total amounts. This is because the statement includes a list of transactions that have been cleared before the closing date, printing, and mailing of the invoice. Meanwhile, you continue to record your checks, deposits, and withdrawals.
Start by recording every check, every ATM withdrawal or deposit, and every debit card purchase in your check register. It’s best if you record each transaction right away so you know your balance and how much you have left for bills and necessities. Hold on to every receipt, regardless of the amount, at least until you write it down on your register and it’s cleared by the bank.
The best moment to balance your checkbook is right after you receive your bank statement. You can use the register that comes with the checkbook, your own booklet or an excel sheet. Have your checkbook in hand, as well as a pencil, check stubs, receipts, and bank statements. Some people like to use different color pens or markers to highlight. Whatever makes the process easier for you.
Steps for Balancing Your Checkbook
- Print your last bank statement and record any interest earned on your register book or on your excel sheet. Add the balance.
- Now do the same with charges taken from the account, like check or monthly services charges, ATM and/or insufficient funds fees. Subtract them from the balance you have on your register (your last checkbook balance).
- Now make sure all the deposits on the statement match the ones you have previously recorded on your register. Check dates and amounts, highlight those that do not appear and add them up.
- With a pen or highlighter, check the transactions that match on your bank statement and your register. Make sure the quantities and dates are the same. This would include checks and ATM withdrawals, debit card transactions and automatic payments. If you find some that don’t match, put a small erasable mark on them.
- Once you’re finished cross-checking the transactions, go back to the ones that did not match. Make sure you know when and why the charge was made, that the amount is exact or that the check numbers are correct.
Leave a note on them so you can verify with your bank later on. Confirm that the items with the erasable notes are not outstanding transactions. Note: Any transaction that is outstanding 60 days or more needs to be cleared as soon as possible. Call the person or company the payment was directed to, or call your bank.
- Now that you know which withdrawals are outstanding (the items you put a checkmark on), add them up.
- Finally, compare the balance on your invoice to the one on your checkbook register. Do this by adding the deposits that are recorded on the register (but not on the bank statement) to the statement’s ending balance, and then subtracting the total amount of the outstanding transactions. If the total is the same as your checkbook register balance, congratulations! You’re done!
Help! The numbers don’t match!
Don’t panic. Check for any math errors in your checkbook register, such as reversed numbers (e.g., $74 instead of $47), subtracting a deposit instead of adding it, adding a check instead of subtracting it, automatic payments that were not included on the sum, etc.
You can also check with these formulas. First, subtract the smaller from the larger amount and divide the difference by 9. If the result is even, you might have transposed numbers (like $34 instead of $43). Go back and re-verify. Now divide the difference by two. If the result has decimal numbers, find that amount in your checkbook register and make sure that you did not add it instead of subtracting it.
If you have any questions, check the back of your bank statement. Most of them include instructions on this process and have answers for frequently asked questions. Or you can always call your bank to clear out any outstanding transactions or charges you don’t recognize.
Keep It Up, Practice Makes Perfect
Continue doing this process every month to get instant results and benefits. Keeping your numbers in order by recording every transaction, fees and interests on your bank account will set you up for a healthy financial future.
Consider Switching to Online Bill Pay
While checks still serve a purpose, they are slowly starting to fade into the background in favor of debit cards and online bill pay. The advantage of sending a check through online bill pay vs. a paper check is that the money gets deducted from your account immediately. This helps to avoid the possibility that you forgot about a check that was outstanding and will reduce the likelihood that your account becomes overdrawn.
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