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Balancing Your Checkbook

Here are four key reasons you should take the time at the end of each month to make sure your checkbook balances with your checking statement.

You can verify your records.
Balancing your checkbook allows you to verify the funds you have in your checking account on a regular basis. Your records should match your financial institution’s records at any given time.

You can correct mistakes.
Unfortunately, all financial institutions can make mistakes. Thousands of transactions are processed each month and, as you can imagine, there may be a chance for error. If you balance your checkbook regularly, you have the opportunity to find the error quickly and ask the financial institution to correct it immediately.

You can be charged NSF fees.
If you make a mistake or forget to post a transaction in your check register, you may bounce checks, exposing you to numerous non-sufficient funds (NSF) fees of $25 or more per occurrence. Additionally, too many NSF fees can put you in poor standing with your financial institution.

You can fix a problem quickly.
If you do find a problem, it is easier to go through one month of transactions as opposed to several months or even a year’s worth of transactions to fix the problem.

Tools to Balance Your Checkbook

Balancing a checkbook is not a difficult process. And, if done on a regular basis, can take less than an hour. You will need three things to balance your checkbook:

  • Last month’s statement. However, if you are a new user, you’ll be starting from scratch.
  • Your check register from the point where you balanced it last.
  • The current checking account statement.

How to Balance Your Checkbook

Now, we will go through the balancing process so you can get a picture of what exactly should be done on a monthly basis:

Reconcile Your Checks.
You should look at the checks you have written (whether you physically receive them or can view them online) to determine if there are any that have not cleared your financial institution. You can do this by sorting your physical checks in number order or checking the order listed on your statement with that on your financial institution’s online banking system or other balancing program (e.g., Quicken). In your check register, check off each cancelled check returned to you or each check that appears on the check listing. Be sure the amount recorded is accurate.

Reconcile Your Deposits.
Determine whether or not the deposits you have made over the month that are listed in your check register are reflected accurately on the checking statement, including direct deposits. Again, be sure the amounts are accurate and listed appropriately. Check off the deposits in your check register as you did for the checks.

Reconcile Your ATM Transactions, Debt Card Purchases, and other Online Transactions.
You should now go through the same process as you have done previously with every ATM transaction, debit card purchase, or online transaction (e.g., purchase something online directly through your checking account). Be sure to check off each transaction that has cleared the financial institution.

Record Interest Earned and Fees.
It is important to make sure you record the interest earned on your account (if applicable) and any type of fee charged by your financial institution (e.g., checks, NSF, etc.).

List Outstanding Deposits.
You should then go through your check register and list any outstanding deposit that has not yet appeared on your statement. Total all of these outstanding deposits and list them on a piece of paper or computer spreadsheet program.

List Outstanding Checks and other Transactions.
The next step is to list all outstanding checks you have listed in your register (or those not cleared through your financial institution as of yet). Additionally, list any ATM, debit card or online transaction that has not yet cleared your account. Add up all of these transactions and list them underneath the Outstanding Transactions total you have placed on a piece of paper or computer spreadsheet program.

Balance the Checkbook.
Add the outstanding amount to the statement ending balance. Then, compare it to the ending balance in your check register. If the two amounts match, your account is in balance. If not, you should follow some additional steps.

What Do You Do When You Still Don’t Balance?

If you find that your account does not balance to the penny, check the following:

  • Have you listed everything that was not checked off on the statement?
  • Have you subtracted and added correctly in your register?
  • Was there anything on the statement, such as a service charge, interest, check printing charge or other fees which you did not list in your check register?
  • Were you really in balance on your last month’s statement?
  • Did you check off everything correctly?
  • Are the check amounts the same?

Once you have answered these questions, and you are still not balanced to the penny, call your financial institution for further assistance. The experts at your financial institution will be able to show your financial history and correct any mistakes that may have been made. Additionally, there may be fraud involved and you have report that to them immediately.

The key issue here is you must take the steps to balance your checkbook each month. Do not delay this important financial matter…it can save you time and money in your financial future.

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