Balancing a Checking Account

It’s tempting when you pay so many of your bills online to skip on balancing your paper checkbook. After all, balancing the checkbook is no one’s idea of a good time. And with electronic banking now so popular, it’s easy for most consumers to quickly check their balances online.

This doesn’t mean, though, that it’s still not important to balance your checkbook on a regular basis. Yes, you can check your balances online if you’re a fan of electronic banking. But what if you’ve forgotten about that $350 car payment and your financing company hasn’t cashed the check yet? You might mistakenly think you have more money in your account than you really have.

That can lead to financial disaster: bounced checks and the fees that come with them.

Don’t fear, though. Balancing your checkbook isn’t as bad a task as it seems. In fact, with some basic bookkeeping abilities, you can quickly and accurately balance your checkbook to make sure that you never accidentally drain your funds.

Be a good record keeper

Balancing your checkbook all starts with keeping good records. This means that you must keep track of every time you use your debit card to fill up your gas tank, write a check to your mortgage company or withdraw $20 in spending money from the local ATM.

As soon as you return home after making these purchases, writing these checks or withdrawing that cash, write down the amounts you’ve removed from your checking account in your checkbook’s paper ledger. And write down these amounts exactly, down to the last cent. You need to know exactly how much money is in your checkbook if you hope to balance it.

Ask for your bank statement

Before balancing your checkbook, you’ll need access to your most recent bank statement. This could be simple if your bank offers online checking. Simply log onto your bank’s Web site, type in your user name and password and call up your current account balance. The odds are your bank will list your current balance and your most recent statements.

If you don’t have access to electronic banking, you’ll either have to stop in or call your bank to request your most recent bank statement. Your bank might also send you your account statements on a regular basis, usually once a month. You can use that statement, but only if it’s not more than a few days old. If it’s too old, there will be too many transactions that aren’t listed on the statement.

What’s cleared?

Next, you need to check your checkbook ledger to determine which of your payments haven’t yet cleared. For instance, if you mailed a check to your daughter’s preschool for $500 and the school hasn’t yet cashed it, you’ll need to note this when balancing your checkbook. Your account might have $4,000 in it. But you’ll need to subtract that $500 preschool payment from this balance to have an accurate record of where you stand financially.

You’ll need to do the same if you’ve made deposits to your checking account that haven’t yet cleared. For instance, a client may have sent you $500 through PayPal. Deposits made through PayPal usually take up to three business days to actually get into your checking account. When balancing your checkbook, make sure to account for these deposits, too.

Remember, you don’t have to be an accountant to balance your checkbook. You just need to be willing to take a small amount of time on a regular basis — once a week or once a month, perhaps — to track what you’ve spent and what you’ve earned.