Balancing a checkbook is crucial in making sure you don’t spend more than you have which leads to an expensive lesson. It also helps track your spending and help you maintain your budget. Here’s the A, B, C’s to balancing a checkbook.
The Transaction Ledger
When you receive your checks, you will have a couple of blank ledgers. The ledgers have columns for:
- Check number
- Date of transactions
- Description of purchase or deposit
- Amount of check, withdrawal or purchase
- Deposit amount
- Balance after the transaction line item
If you don’t have a ledger, create one. This is where you will record everything; every deposit, check, withdrawal or purchase. Start with a beginning balance (or your opening balance if it’s a new account) and as you make transactions, subtract from or add to your balance (which will show at the end of the line).
If one thing is missed, it could throw your account off. The last thing you want is a bounced check (ex: You write a $95 check, but only have $90 in the account when the payee tries to clear the check through your bank. It is returned to you as insufficient.) If a check bounces, you will be charged an insufficient funds fee (This fee usually ranges between $25-$50 per check) from the bank, and in most cases, a fee from the payee.
Sometimes your bank may allow a check or transaction to clear, putting your balance in a negative state. Although they are saving you from the embarrassment of a bounced check and potentially extra fees from the payee, the bank will still charge you an insufficient funds fee. Now your account has a negative balance and that means a daily fee charged to you from your bank for the length of time your account remains negative.
Obviously, these fees can add up and create a financial hole that is tough to get out of when you are already struggling financially.
*Extra Tip* If available, when setting up your checking account, ask about overdraft protection.
Managing your bank finances and transactions is also made easier with online banking. Every bank at this point should offer this, so make sure to get the login information and set it up. Banks will more than likely have an app you can download for mobile banking as well.
With online banking, it gives you instant access to transactions; helping you keep track and compare everything to your own records, recall a check to view if you forgot to write it down and gives you quicker response time to unrecognizable charges and report possible bank fraud.
*Extra Tip* As you go through your transactions online, put an X next to the transactions and checks in your ledger once they have cleared.
Banks are different with how they display balances and charge fees; some banks may show a transaction on the online banking, but the balance doesn’t reflect due to the transaction still pending. This could lead to you thinking you have more available than you actually do.
Make sure to ask around to find the most trusted and customer-friendly banks in your area. Also, don’t be afraid to ask plenty of questions when setting up the account. There is no such thing as too many questions, especially when dealing with your finances.
So, shop around, ask questions and keep good transaction records. You will do just fine.