How to Balance Your Checkbook

I admit that balancing my checkbook is not one of my favorite things to do. As a matter of fact, it may actually be the absolute last on the list of things I enjoy. This makes it very tempting to put off doing until another time. However, this is not a wise thing to do. People, and even banks, do make mistakes. Reconciling your records with the statement that comes from the bank is really the only way to catch those mistakes. If you make a mistake, such as transposing numbers, adding or subtracting incorrectly, or forgetting to write a check into your register, you might bounce checks. If the bank should make a mistake, "most banks allow you a certain amount of time following the receipt of your bank statement to report an error. If you fail to regularly balance your checkbook you may miss the option of reporting errors" (Balancing Your Checkbook).

The following instructions for balancing your checkbook assume the following: 1) this is the first bank statement received after opening your account, 2) all checks written have been recorded into your register, and 3) you have recorded all deposits into your register. Each time you record something into your register, make sure you add or subtract it from the balance immediately, in order to keep an accurate running total. This way, you will always know how much money you have in the bank, and how much you have available to spend.

Record Bank Fees

When the statement arrives from the bank, the first thing you must do is look for any bank fees. Types of fees that may have been deducted from your account include bank service charges, charges for checks you ordered, ATM fees (if you use a debit card), and non-sufficient funds (NSF) fees, which are what the bank charges you if you bounce a check. Record each bank fee into your check register and subtract them from your running total.

Add Interest Earned

If you have an interest bearing checking account you will earn interest each month on the money that you keep in that account. Look on the bank statement for the amount of interest earned during the past month. Record this amount into your check register and add it to your running total.

Compare Your Register to the Bank Statement

Now you need to verify that every transaction in the bank statement matches the transactions in your check register. Make a check mark next to every item in your check register that is listed on the bank statement. This includes the bank fees and interest earned that you recorded in the steps above. Once this step has been completed, you will likely notice transactions listed in your check register that do not have check marks next to them. This is alright. These are items that had not posted to the banks records by the time the statement was mailed out, usually transactions that occurred near the end of the month.

Add or Subtract Outstanding Items

Using a calculator, key in the ending balance from the bank statement. Add to this number every deposit listed in your register that does not have a check mark next to it, then subtract every check or withdrawal listed in your register that does not have a check mark next to it. Get the total and compare it to the ending balance in your check register. These numbers should be the same. If they are not the same, continue to the next step.

Finding and Correcting Errors

Go through your check register and verify that the dollar amounts of checked items match the dollar amounts on the bank statement. If you find that you made a mistake entering a number, I recommend correcting the error on a new line in the register and adding or subtracting the amount of the mistake. This is much easier and neater than crossing out numbers or using correction fluid. For example, if you wrote in your register check number 102 in the amount of $47.68 and discover that the actual amount of the check on the bank statement is $47.86, first determine the difference. In this case, the difference is 18 cents, so you will write this in your register with a short description, such as "mistake on check #102" and subtract it from your running total. You subtract it in this case because you wrote the check for more than you initially recorded, so you did not subtract enough in the first place. Place a check mark next to any additional items that you write in your register to make corrections.

It is possible that the bank made a mistake. If you discover that this is the case, contact your bank using the procedure your bank has established for such disputes.

Conclusion

While balancing your checkbook may not be a fun activity, it is definitely worthwhile. When done consistently every month using the steps outlined above, you will find that it becomes much easier over time.

References

Cliett, R. "Balancing Your Checkbook." BellaOnline website. URL: http://www.bellaonline.com/articles/art15264.asp