These days, most people don’t balance their checkbooks. Most people don’t even keep checkbooks anymore. Big mistake.
Benefits of balancing your checkbook
- Discover bank errors.
- Identify bank fees.
- Find your mistakes.
- Discover undeposited checks that may have gotten lost in the mail..
- Discover frauds against your account.
- Keep track of your bank balance.
How to balance your checkbook
- Keep your checkbook current. Each time you make a deposit, write the date and amount. Each time you write a check, write the date, check number and amount. Each time you take money out of an ATM, record the withdrawal, including any bank fees. Keep a running balance (adding new deposits and subtracting checks and withdrawals). For most people and many small businesses, believe it or not, this is best done with paper, in that little booklet that came with your checks, rather than in the internet “cloud.”
- Balance your checkbook once a month. THREE STEPS:
STEP ONE: Adjust your bank balance. Take the balance on your bank statement and add to it any deposits not yet recorded by your bank. Subtract any outstanding checks that haven’t yet cleared the bank.
STEP TWO: Adjust your checkbook balance. Start with the balance in your checkbook. Then, update your checkbook with any new items that appeared in your bank statement (interest earned, bank fees, etc.).
STEP THREE: Compare STEPS ONE and TWO. The adjusted bank balance (from STEP ONE) and adjusted checkbook balance (from STEP TWO) should equal. If they do not, carefully review the bank statement for errors and unauthorized transactions. Then carefully review your checkbook for errors. Work on this until you can get them to equal.
Personal Finance software (like GnuCash or Quicken) will make balancing your checkbook easier, especially if you have many transactions. If you’re a patient Luddite, then you can try the form usually printed on the back of bank statements.
