Balancing your checkbook is an important and simple habit to develop if you want to practice better money management in 2017. Being financially responsible means being in control of your budget and spending. You shouldn’t have to wonder if a check will bounce or a card will be declined because of insufficient funds, you should know.
Keeping an accurate, balanced ledger can help you avoid overdraft fees, bounced checks, and possible credit/debit card theft. In addition to monitoring your account, keeping a detailed record of your transactions helps you understand where you’re spending the most money and how to tighten up your budget.
To better understand how to balance your checkbook, familiarize yourself with these basic terms:
- Deposit: addition of funds
- Withdrawal: subtraction of funds
- Transaction: any credit or debit to your account
- Checkbook register: record your transactions
Your Checkbook Register
Every checkbook comes with a register where you will physically record every transaction in the fields provided. Your register has a place to record check numbers, date of transaction, transaction description, withdrawal or deposit amount, and your new balance.
First, find out your current account balance. Remember, there are factors that can affect the accuracy of your balance, such as transactions that have yet to be processed. Did you mail a check with your water bill just this morning? ATMs provide 24-hour balance inquiries, but to get the most accurate figure, you should speak with someone at your financial institution.
Record every transaction as it occurs in your checkbook register. This includes debit/credit card purchases, paper checks, ATM activity, online payments, and deposits. If you don’t have time to update your checkbook on the spot, keep a receipt or a slip of paper with the transaction information as a reminder and update your register later.
It’s important to account for transactions that occur on a regular basis and don’t provide a formal notification. Perhaps you have a gym membership that automatically debits your account each month, or you receive paychecks in the form of direct deposit – these paperless transactions need to be recorded in your register. Compile a list of recurring transactions to ensure your balance is accurate.
Double Check Your Math
If your bank sends a monthly statement in the mail, use these to compare your monthly transaction list against theirs. If your ending balance matches the banks, you have successfully tracked every dollar spent and saved for an entire month. With practice, balancing your checkbook will become easier and more habitual, and you will benefit from the results of good money management.