Video:How to Balance a Checkbookwith Jonathon E. Stewart
Sure you can always pop into your bank account online, but keeping track of your checking account offline provides a valuable paper record - not to mention a manual wake up call of your actual spending. Learn one easy way to balance a checkbook.See Transcript
Transcript:How to Balance a CheckbookHey guys - Jonathon Stewart here for About.com. Balancing your checkbook is not something they teach you when you open a checking account, it's not usually taught in school, and it's not something you usually chat about over lunch with your friends. So, how does one learn this simple but invaluable life skill? Well, easy. Right here. Check it out.
Why Balance a Checkbook?Keeping a balanced checkbook is just a simple way of knowing how much money you have at any given time in your checking account. Not only will this help you to budget your expenses better and avoid ever bouncing a check, it will also get you in the habit of making sure your bank, or anyone you pay money to, does not take more than you intend.
There are many different ways to do this, and it's up to you and your family to determine the way that's going to work best for you. But here are a few of the basics, which will get you on the road to a balanced checkbook in no time.
Record All Check TransactionsKey number one is to write everything down. Anytime you write a check, be sure to record it either in your wallet check ledger, book ledger, spreadsheet, or accounting software. Be sure to keep track of the date, the payee, and the amount you've paid - writing a note about what the check is for will help you tally your expenses for budgeting purposes, too - same for deposits. If you use an ATM and/or debit card on your account, be sure to get a receipt for any transaction, and write these down as well.
Seems like a lot of writing, right? Well, keep in mind that if you do this consistently for a year, and keep it all in one place, you've got a solid, written record that you can use to itemize expenses and avoid getting audited come tax time. Take that Mr. Tax Man!
Track the Checking Account BalanceIn a column next to the items you've been so diligently writing down, keep a tab on your account balance as well. Starting with your old balance, take your first transaction, and either subtract any expense from the total or add any deposit, and make note of your new balance to the right. Continue through all your transactions until you've got your end balance. As you add new expenses or deposits, just keep the tally going.
Once the funds for a check you've written are withdrawn from your account, that check is said to have "cleared" - now, there is sometimes a lag here, but not always. At many stores these days, checks are debited immediately, so don't think you can use the time between writing a check and it clearing to wait for new funds to materialize. Insufficient funds fees are costly, and can eventually plague your credit report as well.
Keep Monthly Checking StatementsOnce you've got about a month's worth of transactions written down, it's time to look at your monthly checking statement. Carefully go through each item on your statement, and make sure it matches up with an item in your own ledger, putting a check mark of some kind next to every cleared item.
Next, take your personal ending balance and write it at the top of a new sheet of paper. Subtract any bank fees from your statement, or any transaction you might have forgotten to write down along the way. Likewise, add any deposits or credits you might have missed, and circle the new total. This is your Adjusted Account Balance. During this process, don't be afraid to call your bank on any unfamiliar or suspicious deductions - whether it's your bank's fault, or a fraudulent charge, these errors pop up all the time. And, they're pretty much never in your favor.
As you come down the homestretch, list any outstanding checks, debits, withdrawals or other charges that remains "un-cleared" on your ledger, add these up, and circle the number. These are your Outstanding Expenses. Finally, write the ending balance on your checking statement, add any deposits you've made that have not shown up on your statement, subtract you Outstanding Expenses, and your final number should match your Adjusted Account Balance from earlier.
If not, well - join the club. It happens to the best of us. Go back and check your math, make sure you haven't missed any expenses or deposits, and figure out where the discrepancy is. And, bear in mind that while banks sometimes make mistakes on specific transactions, they don't usually make mistakes in arithmetic, so be sure to check it all twice before calling the bank and screaming bloody murder.
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