Checks and Balances

Balancing our checkbook. For many of us, it’s a lot like cleaning an oven–just one of those tasks that we know we should do, but rarely find the time for. From the time we’re young and open our first checking account, we learn about the importance of balancing our checkbook and practicing sound money management. Yet, so many Americans fail to take the time to do it, and end up with the hassle and expense of overdrafts. The reality is, balancing a checkbook is more convenient than ever. With the advent of online and mobile banking, we can access our bank account information – anytime and anywhere. Compare that with having to wait 30 days to get your bank statement in the mail to reconcile your accounts.

Balancing a checkbook may seem tedious and time-consuming, but the fact is, it’s critical for good money management and avoiding costly fees.Balancing a checkbook may seem tedious and time-consuming, but the fact is, it’s critical for good money management and avoiding costly fees. It doesn’t matter whether you accomplish it using your old check register or sophisticated financial management. The important thing to remember is to do it.

Here are some of the reasons why balancing a checkbook is so important.

Correct Mistakes

Human bank errors do happen. A clerical bank error could result in a check or deposit incorrectly posted to your account. So if you deposit a check for $100, and a teller processes it for $10, you’ve just lost $90. By balancing your checkbook, you’ll ensure that your records are in sync with those of your financial institution.

Avoid Costly Overdraft Fees

One of the most important reasons to balance your checkbook is to avoid the hassle and expense of overdrafts. In many cases, overdrawing your account even by a little can result in costly overdraft fees. So that $2.50 cup of coffee could end up costing you $30 or more in overdraft fees.

Additionally, with electronic advances, many paper checks are now turned into electronic transactions that clear your account faster. By balancing your account and keeping track of the checks you write, you’ll avoid spending money that’s not really available to you.

How to Balance your Checkbook:

So now that you know why you should balance your checkbook, it’s important to know how you do it. It’s really quite simple.

Start by reconciling your transactions, including:

  • Your checks – make sure the amounts that posted to your account match the amounts you wrote the checks for.
  • Your purchases — verify the amounts of Debit Card transactions and any withdrawals you make.
  • Your deposits – make sure your deposit amounts are recorded correctly.

List Outstanding Checks

Make a list of checks and ATM or Debit Card transactions that haven’t cleared your account and total them.

List Outstanding Deposits 

If you’ve made deposits to your account that haven’t cleared, list them and add them up.

Record Bank Fees 

These include monthly fees and ATM transactions.

Add your deposits to your balances and then deduct any outstanding checks, and purchases and add any deposits that you have made but have not been recorded. Keep in mind that deposits that haven’t yet posted to your account are not yet available to you. When funds are available depends on your financial institution’s funds availability policy, which is usually posted in branches or available online.

As you see, balancing your checkbook is a really a simple process and one that can save you a lot of time, money and aggravation down the road. Your dirty oven is another matter.


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