When it comes to keeping track of one's money in a checking account, many today feel that the trusty and convenient ATM printout is the simplest and only way to go. But the problem is that we are spending our money in more and more ways - with ATM cards, point of sale (POS) purchases, and automated deposits and debits - making it difficult to keep track of our money. And don't even mention those dreaded bank fees that seem to attack us en mass at the end of each month too!
And yet, despite these advances, balancing one's checkbook remains an important financial task. It's important to note that the ATM printout will not show you checks that have been written but not yet deducted from your account. It will not show you trends or help you to manage your finances accurately.
To balance one's checkbook one needs to understand some basic principles of bookkeeping, and follow a few easy steps.
The first key is to record all your spending. Every time you use your ATM card for a withdrawal or point of sale (POS) transaction, you need to make a note of it in your checkbook register, or in a little book kept just for this purpose.
Secondly, it is crucial that you record amounts and payee details when writing out checks. Failure to do this will have you scratching your head when your bank statement comes if there are still checks outstanding. "Now who did I pay and how much was it for," you'll be asking yourself. It's pretty much impossible balancing your checkbook if you don't keep accurate records! If you are too scatter-brained to record each check religiously, you may want to use duplicate checks. You can record them in your own time, putting a red mark in the upper corner of each duplicate as each is done.
Thirdly, checking your balance at the ATM frequently can help you to keep track of spending - especially if you share an account with a spouse who is not as diligent at recording purchases as you. If you're balancing a checkbook for the two of you it might also help to have a common spot at home to collect receipts. Make this a habit!
Finally, we need to look at income. Record your bank deposits and any other income in much the same way as your expenditure.
Notwithstanding bank charges, if you were to follow these guidelines, you would find that your bank balance should correspond to the bank's balance. When balancing your checkbook you simply begin with the ending balance of your last statement; you then add all of the deposits and other credits; then deduct all debits, POS and checks written since the last statement. Finally, you deduct any recurring bank charges, such as standard monthly account fees, and automatic (monthly) debits like one's health plan, mortgage and car loan repayments. And voila - an accurate reflection of your bank balance (apart from other nominal bank charges, which you can capture when you receive your monthly bank statement). But don't forget - if there are any outstanding checks - those issued but not yet cashed - you must remember to consider that money as spent. It is money that will impact on your balance as soon as it clears - even if it's in the following month or two.
To sum up - the most difficult part of balancing your checkbook is to be an accurate recorder. The formula to bear in mind is a simple one: one's ending balance plus deposits and credits; minus checks, debit/POS transactions, automatic debits and bank fees. By being consistent in your bookkeeping you will find that balancing your checkbook is as simple as counting from one to four.
And yet, despite these advances, balancing one's checkbook remains an important financial task. It's important to note that the ATM printout will not show you checks that have been written but not yet deducted from your account. It will not show you trends or help you to manage your finances accurately.
To balance one's checkbook one needs to understand some basic principles of bookkeeping, and follow a few easy steps.
The first key is to record all your spending. Every time you use your ATM card for a withdrawal or point of sale (POS) transaction, you need to make a note of it in your checkbook register, or in a little book kept just for this purpose.
Secondly, it is crucial that you record amounts and payee details when writing out checks. Failure to do this will have you scratching your head when your bank statement comes if there are still checks outstanding. "Now who did I pay and how much was it for," you'll be asking yourself. It's pretty much impossible balancing your checkbook if you don't keep accurate records! If you are too scatter-brained to record each check religiously, you may want to use duplicate checks. You can record them in your own time, putting a red mark in the upper corner of each duplicate as each is done.
Thirdly, checking your balance at the ATM frequently can help you to keep track of spending - especially if you share an account with a spouse who is not as diligent at recording purchases as you. If you're balancing a checkbook for the two of you it might also help to have a common spot at home to collect receipts. Make this a habit!
Finally, we need to look at income. Record your bank deposits and any other income in much the same way as your expenditure.
Notwithstanding bank charges, if you were to follow these guidelines, you would find that your bank balance should correspond to the bank's balance. When balancing your checkbook you simply begin with the ending balance of your last statement; you then add all of the deposits and other credits; then deduct all debits, POS and checks written since the last statement. Finally, you deduct any recurring bank charges, such as standard monthly account fees, and automatic (monthly) debits like one's health plan, mortgage and car loan repayments. And voila - an accurate reflection of your bank balance (apart from other nominal bank charges, which you can capture when you receive your monthly bank statement). But don't forget - if there are any outstanding checks - those issued but not yet cashed - you must remember to consider that money as spent. It is money that will impact on your balance as soon as it clears - even if it's in the following month or two.
To sum up - the most difficult part of balancing your checkbook is to be an accurate recorder. The formula to bear in mind is a simple one: one's ending balance plus deposits and credits; minus checks, debit/POS transactions, automatic debits and bank fees. By being consistent in your bookkeeping you will find that balancing your checkbook is as simple as counting from one to four.
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