Balancing your checkbook is a lost art. Why? In an era where most of our transactions are online, few people take the time to review their transactions manually, even though balancing your checks against your statement is theoretically easier. However, balancing your checkbook is important for money management. There are two reasons that you must ensure your checkbook is balanced every month:

1. Fix Mistakes

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Financial institutions are not immune to mistakes. Your bank teller may process hundreds of transactions a day, and it is easy to make a mistake. In some cases, this can cost consumers a lot of time in money. Some people have even had their cars repossessed due to accounting errors by the bank that would’ve been rectified if the car owners had verified their payments showed on the account. If you double-check your transactions frequently, you can quickly ask your bank or lender to fix it right away.

2. Avoid NSF Fees

Non-sufficient funds (NSF) are what happens if you bounce a check or debit. The NSF fees can be up to $25 or even more for some transactions. Sometimes the fees multiply because you did not have enough money in your account when you used your debit card three times in an afternoon. This can result in hundreds of dollars of fees. These fees often cause your financial institution to downgrade you.

This can be avoided by simply making sure your transactions post in your check register – or its online counterpart.

How to Balance Your Checkbook

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Many people have never balanced their checkbooks. If this is you, then here is a step-by-step explanation for how to go about the process.

  • Begin by reconciling your checks. This means reviewing the checks you’ve written and making sure they have all cleared the bank. Sort your physical checks in order of the date written or their number, then look at your financial institution’s online list in your account. Go to the check register and check off each check that was returned to you and that cleared the bank. Then make sure the amount recorded by the bank is accurate.
  • Next, reconcile your deposits. Figure out if all of your deposits cleared the bank and are on your checking statement. Don’t overlook direct deposits. Check them off one by one in the check register.
  • Do the same process for your ATM transactions, debit card purchases and online purchases. This can be complicated now since there are so many other ways to pay. It helps to write out each transaction, with dates, and check them off in your check register.
  • Record any interest you have earned on your account, and deduct any bank fees charged by the financial institution.

The final steps involve calculating what is still outstanding.

  • List outstanding deposits that have yet to appear on your statement. Do the same with checks, ATM transaction, debit card transactions, and other payments that have not cleared your account. Add the numbers up and list the total.
  • Then add the outstanding amount to the statement’s ending balance. If the balance is the same in your check register as it is on your statement, the account is balanced

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