How to Balance a Checkbook

Author:     Thursday, January 30, 2014 12:00 AM

As people come to rely more and more heavily on instant access to their banking information via computers or mobile devices, traditional checkbooks may seem a bit old fashioned. But nothing substitutes for knowing exactly where you stand financially -- and nothing reinforces that knowledge quite as strongly as making the calculations yourself. that's why keeping your checkbook balanced is so important to ensure that you don't end up bouncing checks, paying hefty overdraft fees, or facing a sudden financial emergency. Here are the basic steps in keeping a balanced checkbook:

  1. Begin with the correct initial amount. As soon as you set up your checking account by making that very first deposit, make a note of that transaction or set up your online banking account so you can refer to the total later. Your first checkbook may take some time in arriving by mail -- but the instant it does, record that deposit in the appropriate column. Starting with the right balance is critical if you want all the other transactions to add up properly.
  2. Record each transaction as it occurs. Every time you write a check, take out cash or charge a purchase to your debit card, stop right there, get out a pen and record the transaction in your checkbook. Make sure you record it as a withdrawal instead of a deposit, because sometimes the simplest errors can cause the biggest misunderstandings later! Every time you cash a check or put money in the checking account, immediately record that transaction in the deposit column. Real-time record keeping can eliminate many potential discrepancies by removing the "I forgot" factor.
  3. Review each monthly checking account statement sent to you by your financial institution. These statements do not necessarily start on the first day of the month and end with the last day, so focus on the numbers for the included date range and compare them with your check register data. Do you see omissions in your personal records? If so, bring them into line by adding any missing withdrawals or deposits.
  4. Take pending transactions into consideration. After completing step 2, do you still see a mismatch between your statement total and your check register total? It may mean that some of the withdrawals or deposits you recently made (and recorded) have not actually been processed by the financial institution or cashed by the recipient yet. Take a moment to remove these items from your tally. Your checkbook total should now agree with your statement total for the date range in question.

One final step: Make this process a routine. Once you're doing it automatically, you'll find yourself facing fewer unpleasant surprises each month. Happy banking!




Source: BFI