An important skill when you are managing your money is learning how to balance your checkbook.
You might think the act of actually balancing your checkbook is outdated, but it is in fact still relevant and an important step in managing your money every month.
Digital tracking methods are on the rise. Most banks now offer some sort of integration where you can export your spending to track and evaluate in software or digital programs like Mint.com, YNAB and Quicken.
And while you can do some really fancy calculations, projections, charts and graphs, there is something to be said for tracking your spending, as it occurs, in ledger format. (You will also sometimes hear a checkbook ledger referred to as a checkbook register, they are essentially the same thing, a record of transactions).
Simple Checkbook Register ( OR Checkbook Ledger)
A simple checkbook register is a tool where you can track your income and expenses: either as they happen or future payment occurrences.
An example of a future payment would be if you write a check. The money you’ve promised by issuing the check as a form of payment, doesn’t come out of your account the moment you present the check.
That money will be withdrawn at some point in the future when your check is presented for payment to the bank.
What is the Purpose of a Checkbook Register?
The purpose of a checkbook transaction register is to stay on top of the money you have coming in and going out of your bank account every day.
Also, you have the added benefit of tracking your balance on a daily basis. You can see on any given day exactly what shape your bank account is in.
This is an ideal tool for those who are working with a weekly or biweekly budget and you are trying to manage payments for your monthly bills and want to ensure that you have sufficient funds to cover your expenses at any point doing the month.
It’s also especially helpful for families with more than one person drawing on a single account.
Balancing a Checkbook
Balancing a checkbook is essential. Let’s look step-by-step, how to balance your checkbook.
Know Your Balance
The first step in balancing your checkbook is to know how much money you are starting with in your account.
This can be as simple as signing in online or calling your bank.
Please note that the amount given may not take into account payments that have not been processed yet. (Another reason you should be balancing your checkbook regularly!).
Record Transactions
Every penny that goes into or out of your checking account needs to be accounted for. Using a simple checkbook register like the one above is a great way to account for the income and expenses associated with your money.
Categorize Spending
When logging your expenses be sure to categorize how your money is being spent. Assigning categories will make it easier at the end of the month to track how well you did with staying on budget.
Additionally, it’s also an easy way to asses your money allocation. For example, if you are spending 35% of you after take money on food (groceries and eating out), that might be an area you would want to revisit in your budget.
Check-in With Your Money Regularly
Be sure that you are not only being consistent with recording your transactions.
Ideally, you want to update your transactions daily. This is especially relevant if you share an account with someone.
It’s all too easy to accidentally go over budget or overdraw your account when you and your husband, wife, partner, mother, sister, cat, etc. are both spending money out of the same account.
Utilize Bank Statements to Reconcile Transactions and Balance Your Checkbook
The word reconcile simple means to make one account consistent (match) the other.
So when you reconcile your checkbook, you are making sure what’s happened in your register (the list of transactions) matches what’s happening with the money in your bank account.
The more frequently you update your register and clear (check off) transactions as they are reflected in your checking account, the more accurate your register will be and subsequently, the more accurate picture you’ll have for exactly how much money you have at any point in time.
The easiest way to do this is to either pull up your banks statement or print it them off.
Get a highlighter and with your bank statement and register side by side, go line by line and highlight each matching transaction (to include dollar amounts).
Another option, if you choose to download and use my simple checkbook register printable, I also provide a column where you can simply checkoff the transactions when they clear your bank account.
Next, you are going to balance your checkbook. You might be asking yourself what is balancing a checkbook?
When you’ve reached the end of your statement, if there are any lines that have not been highlighted you’ll know that they are either pending (have not yet come out of your account), there was a discrepancy with the amounts, or you missed recording it in your register.
Go through each of these making adjustments to your register as needed. This simple act of making changes and adjustments until your checkbook register and bank statement match is balancing your checkbook.
Once you’ve addressed all your transactions:
If you are using a traditional checkbook register draw a line under the balance indicating the last correct verified balance.
If you are using a printable register, make sure you’ve dated the current register time period and start a new one for the new month.
Bringing it all together.
I hope this guide has been helpful in sharing how to balance your checkbook and reconcile your transactions for an accurate accounting of your money.
While it may feel outdated in the face of all the super sleek digital options, putting pen to paper and becoming an active participant in tracking your money will give you better oversight of your money and how you are managing it.
I would love to hear from you, please drop comments about your checkbook balancing tips or questions below!
