Balancing your checkbook can prevent a lot of problems. It alerts you to any mistakes your bank might make so you can get them fixed. It helps you keep track of the money in your account so you don’t write checks that bounce. And it alerts you to fees your bank charges that you might have overlooked. Here’s how to balance your checkbook and keep your financial records up-to-date:
Write Down All Transactions
Use your checkbook register to keep a record of all transactions to and from your checking account. Of course, you need to write down the dates, recipients, and amounts of checks you write. But you also want to note deposits into your account, times you withdraw cash or transfer money into a different account, online transactions, and debit card transactions. If you’ve set up automatic bill payments or automatic transfers to a retirement fund, make sure you include those transactions too. And you should include any fees that the bank takes out of your account.
Compare Your Record With the Bank’s
Next, either wait for your statement to arrive in the mail or pull it up on the bank’s website. As MyCreditUnion.gov explains, you should compare the transactions you listed in your checkbook register with the ones the bank shows in its statement. Each time you find an entry in your checkbook that matches an entry in the statement, mark that line in your checkbook so you’ll know you’ve already matched it. Some entries in your checkbook may not match anything in the statement; these are for checks or transfers that haven’t yet cleared. It could also be that something appears in your statement but was never entered in your checkbook. If so, write it down in your checkbook register now to correct your record.
Account for Transactions That Are Still Being Processed
Go back to the entries in your checkbook that you didn’t find matches for in the bank statement. It’s time to update the statement’s balance so that it will reflect these transactions. Add any deposits listed in the checkbook that haven’t been processed yet to the bank statement. For example, if the statement shows a balance of 500 dollars and you have an 80 dollar deposit to your checking account that hasn’t cleared, add 80 dollar to the statement balance so that its updated amount is $580. Subtract checks or withdrawals you have listed that haven’t yet been processed. For example, if you also have a check for 40 dollars that hasn’t cleared, subtract 40 dollars from 580 dollars to get an updated balance of 540 dollars.
Now compare the updated bank statement balance with the balance you get when you total all the transactions in your checkbook register.
Look for Mistakes
If the two balances match, you’ve finished balancing your checkbook. If they’re different, the next step is to look for mistakes. Mistakes might entail items that you forgot to enter or that you entered incorrectly, or they might be errors on the bank’s part. When you find mistakes in your record, fix them and find the new balance. If you find a bank error, such as if you were incorrectly charged a fee twice, contact the bank.
Finally, remember to balance your checkbook often. Ideally, you should balance it once a month soon after you get your statement from the bank. Following a schedule like this makes balancing your checkbook easier because it ensures that you only have to look at a few weeks’ worth of transactions at a time.
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Filed Under: Money management
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