The idea of using a pen and paper to add and subtract your income vs. expenditures seems a bit outdated. When most think of a checkbook, they think of the past. However, the art of balancing your checkbook is an art still of importance today.
Why should you balance your checkbook?
- It helps you keep track of your money in real time
- It helps you avoid overdrafts and cumulative fees.
- It helps you budget and reach your savings goals.
- It helps you spot errors, fraud, or overlooked transactions.
Before you can begin balancing, you must first understand what it is you are looking at. The area within the checkbook where transactions are recorded is called the register. At the top of the register are about six columns: Number (the check number), Date (date of transaction), Description (context of purchase), Amount or Debit (sum of the check, withdrawal, or payment), Deposit (amount of deposit), and Balance (the actual amount of money within the account).
5 Steps To Monthly Account Balancing:
- Enter transactions, deposits, and withdrawals in your checkbook register every day.
- Review and compare your monthly account statement against your checkbook. Mark off the items that match. If any items do not match, begin looking at receipts for mistakes or reach out to the bank for clarification.
- If transactions are correctly listed on the account statement but were missed in the register, write it in. If there are things written in the register but not on the statement, subtract it.
- While filling in the information, and checking it monthly, you may come across errors. It is vital to double-check everything then. Just like in the game of sudoku, everything must add up for it to work.
- The goal of this process is to match your check register with the ending balance of your monthly statement. If the balances match, you are finished!
21st Century Updates:
It is no surprise that most do not use a checkbook, as credit and debit cards become the primary source of spending. Unfortunately, this makes balancing a checkbook or balancing your accounts harder because you have far more different ways of spending money to keep track of other than paper checks. To keep up with digitalization, here are a few different types of transactions to keep track of:
- Scheduled online payments
- Automatic withdrawals (such as Netflix)
- Direct Deposits