May 18, 2021
Category: Money Management
How to Balance Your Checkbook
Keeping a balanced checkbook may sound like a relic of the past. After all, with online banking statements and mobile banking capabilities, your financial information is often at your fingertips. However, a balanced checkbook is a vital part of keeping on top of your expenses and sticking to your household budget. If you’re curious about the benefits of keeping a balanced checkbook and how to get started, read on to find out more.
A balanced checkbook is a powerful tool to help you stick to a budget and spot any errors or potential fraud quickly. As part of a well-rounded financial plan, you also want to keep track of things like checks that you’ve written but have yet to be cashed. If your account shows a balance of $300, but you’re waiting for a $200 check to be cashed for a bill, then you may easily forget about the check and accidentally overdraw your account or bounce the check.
It may seem out of date to carry around a pencil and paper, recording every single transaction you make into a ledger. Luckily, you can easily balance your checkbook online using a spreadsheet on your smartphone or computer.
Start the process by tracking each transaction on a spreadsheet or a blank document on your computer, tablet, or smartphone. Create a simple checkbook register by setting up separate columns for each of the following details:
Record each of your transactions as they occur. These include every check you write, bill you pay online, every deposit you make, any time you swipe your debit card, and any ATM withdrawals. Make sure to keep your running balance up to date by subtracting every debit as it occurs and entering in any balance. Maybe even create notes in case you might forget why you withdrew cash or made a debit card purchase.
One of the biggest benefits of modern banking and online services is that you have access to your banking information almost instantaneously. Check often to see if your checkbook register balance matches your bank statement ending balance. If it doesn’t, check your account register to see if you’ve listed any transactions that have yet to be posted to your account.
If the balance on your checkbook register still doesn’t match the balance on your bank statement, go through each individual transaction in your checkbook and compare it to your bank statement. You can check the transactions off as they match. If you’ve forgotten to write a transaction down, you can easily add it to your checkbook and correct it. If any of the charges don’t match the charge you wrote down in your checkbook, contact the bank or the merchant to inquire about the discrepancy.
If you see any charges that you didn’t make, notify your bank as soon as possible to file a fraud claim. You’ll want to report it sooner rather than later, as you may be liable for the money that was stolen if you don’t report it within a certain time frame.
Once you’ve balanced your checkbook, draw a line underneath your most recent transaction to mark where your next bank statement will begin, or create a new sheet. Be sure to keep your bank statements, as the IRS recommends you save important documents for up to seven years.
A balanced budget is equally important to a balanced checkbook. In order to ensure that your ending balance each month is positive and not negative, you need to properly budget for all of your expenses. The first thing you’ll need to do is review your financial history to learn how much money is coming in each month and what your average month’s expenses are. It may be helpful to create your budget before the first of the month to know where your money is going before your checks come in.
Check out our post on How to Manage a Successful Household Budget to learn more about creating a balanced budget and sticking to it. You can also check out our post about reading your paycheck stub to learn more about deductions, taxes, and the why the amount you make isn’t the amount you take home.