Balancing your checkbook involves nothing more than making sure you and your bank agree on how much money you have both earned and spent in a month. Ensuring that you and your bank are on the same page financially is very important, but many people still don’t balance their checkbooks. No excuses, though. The entire process only takes half an hour to an hour each month.
If you don’t regularly balance your checkbook, now is a good time to start doing so.
You can use the 4 steps below to get you started balancing your checkbook
1. Reconcile all deposits, withdrawals and spending. In order to reconcile your deposits, withdrawals, and spending, you have to compare your records to that of your monthly bank statement. If you don’t record how much you spend and earn accurately, you need to be doing so now. Once you have an accurate record of your financial transactions you can compare it to your bank statement to make sure things match up.
To do this, start at the top of your bank statement, compare the first deposit or withdrawal to what you have recorded, and mark that transaction off of your bank statement when you have verified that it is correct. Continue checking down the statement until you have finished. If everything matches in the end like it should then you are done. If not, make sure that your records are accurate and that all of the deposits and withdrawals you are counting have actually gone through to the bank.
2. Record interest and miscellaneous fees. Earned interest and small fees that you may not always notice can mess up your records. It is imperative that you take into account the interest on all of your savings and loans and that you keep track of things like ATM withdrawal fees. Otherwise, your checkbook will always look unbalanced.
3. Record outstanding checks, deposits, and ATM activity. Checks that you have filled out but that have not been cashed by their recipient are called outstanding checks. Your bank only takes into account checks that have actually been cashed and not outstanding checks, so make sure you keep the difference in mind. The missing withdrawal from your statement might not be a lucky error in your favor, but instead might be the result of someone not cashing one of your checks as soon as you expected them to. Purchases made with an ATM card and deposits to your account may also float around for a couple of days before taking an effect on your bank account. Record outstanding checks, ATM card activity, and deposits that haven’t gone through yet separately.
4. Calculate your balance. The only thing you have to do to calculate your balance is to take the balance on your statement and make sure it matches your records. Hopefully everything adds up. If not, make sure you have taken into account interest, miscellaneous fees, and the fact that your checks and deposits may not have gone through to the bank yet. If the numbers still don’t add up, you can always contact your bank to try and figure out why there is a discrepancy. Balancing your checkbook may not be the most fun thing you can do in the world, but taking an hour out of your month to stay on top of your finances is well worth it.