Balancing a checkbook can be a tedious task for those who shun financial records and bookkeeping chores. Yet neglecting to reconcile your monthly bank statement with your checking account activity can lead to financial disaster in terms of becoming overdrawn and paying overdraft fees. Intangible problems may include the loss of your reputation and damaged financial integrity.
To prevent these woes, learn how to balance your checking account each month. It's not hard, especially if you tally the balance each time you write a check or make a deposit. Some people use software programs like Microsoft Money to help them balance accounts online. These programs do the hard calculations without error (usually), thus freeing up more time for you to do other things with a mind set at ease.
To balance your checkbook, here are a few tips to keep in mind:
1. Use your check register responsibly. Carefully list each deposit made and all checks that are written. Use a calculator to tally the adjustment to your running balance. Don't rush through it and make a mistake. Write short descriptions for each transaction so you will remember later why you made it. Write neatly with pen instead of pencil so it can't fade or be accidentally erased.
2. Correctly note the date, amount, and source of all electronic activity, such as a paycheck made by direct deposit. List each "virtual" check that you write, including information like the check number, the name to which it is written, and the amount. Many places of business will run your check through their cash register and hand back the check to you. Keep it for future reference. You may wish to include a brief descriptive phrase in the register and on the memo line at the bottom left of the check. That way you'll remember why the check was written and perhaps if this will be an ongoing periodic expense. Also make a note of items that you purchase online if you use your checking account to pay for them. This might include replacement checks or other telephone orders that are deducted from your checking account.
3. Check your monthly bank statement and update your register. Find out when a deposit was made, interest was added, or fees deducted, and note these in the register belatedly. Leave space to add this information when you note the original date of activity. For example, you may expect extra income from overtime worked in the last pay period. Since your paycheck is deposited electronically, you won't see the stub before the deposit, so you won't know the exact amount at first. Call the bank to find out the amount and enter it in your checkbook. Verify this information when you receive the bank statement later.
4. Keep all deposit receipts and cancelled checks if your bank returns them (some don't). Check these against the bank statement when it arrives, and then compare both of these with the original checking account register. This allows for greater accuracy. If you find a discrepancy, note it and contact the bank. Place a checkmark on the deposit slips, beside the item in the check register, and on the bank statement for consistency.
5. Reconcile the outstanding balance on the back of the bank statement. Use this form to show the current balance, a list of outstanding checks and deposits, and the final adjusted balance. Again, if you note discrepancies, call your bank.
6. If you decide to try an electronic banking program, all you'll need to do is enter each transaction figure and click on the appropriate keys to tabulate results. Visually inspect the overall statement to be sure it appears to be generally accurate.
Store banking documents and receipts for at least three years. Some experts recommend saving them for seven years. That way you'll have substantial evidence in the event of a discrepancy indicated by the bank or a vendor.
