How To Balance Your Checkbook

By Sandy Weyeneth

“I never balanced my checkbook when I was in my early twenties. I did not have a clue and it intimidated me. When my checkbook became a mess, I closed that checking account, went to a new bank, and opened a new account. Such was my stellar financial management system!” This illustrates the experience of a friend until one day when she got fed up with never knowing how much money she actually had. Facing her fear, she sat at her kitchen table, and learned step by step how to balance her checkbook. Years later, she now enjoys teaching personal money management.

Although my experience rated a little better than my friend’s, I stumbled too. Once I set a weekend “date” with my checkbook register, most of my receipts, a calculator, and my bank statements. After reconciling six months of bank statements in one day, I felt ready to take on the world!

Balancing your checkbook is very do-able. You simply start right where you are. If you are brand new to banking terms and this process, you can find Basic Banking Terms listed at the end of this article. Most checkbook discrepancies are easy to find and fix. The goal of balancing your checkbook is to make sure that your records and the bank’s records match. To do that, you work through a simple process that uncovers any discrepancies between the two. This is called reconciling your bank statement, or balancing your checkbook. Once you locate the discrepancies and correct them, then your checkbook record and the bank’s record will match. 

Why Balance Your Checkbook?

• With ATMs, electronic payments, debit cards, direct deposits and transfers, it can be easy to lose track of what you withdrew or spent. When you lose track, you could become more susceptible to incur penalties, like at least $25 a pop for bouncing a check (for insufficient funds). Knowing your real balance helps prevent this.
• If there is a problem like a simple subtraction error, you won’t need to wade through months of transactions to figure it out.
• It decreases stress when you know how much you really have in your checking account. (Hint - it is not the amount on your ATM printout.)
• Relying solely on your online activity statement could pose a problem if the bank makes an error, which is rare but can happen. It is smart to have some kind of record of your own (checkbook register or financial program like Quicken) to compare against the bank.

What You Need to Start

• Your most recent bank statement
• Checkbook register
• Account Reconciliation Form (in the Step-by-Step Instructions)
• All cancelled checks. (Checks you have written that have already been cashed. Most banks list them on your bank statement by check number, amount, and date. The bank will often include scanned copies of them too.) 
• Deposit receipts
• ATM receipts
• Calculator
• Pen or pencil
• Ice cream (for celebrating afterwards)

Step-by-Step Instructions

Your bank sends or e-mails you a monthly statement of all of the activity in your checking account for the statement period, usually the past 30 days. It also provides instructions on how to balance your checkbook. Each bank may vary slightly on their approach and terms, but the end goal is identical. The following instructions are patterned from my online bank statement.

1. On your bank statement, look at “Checks and Other Withdrawals.” In your checkbook register, find where you recorded each check listed and put a check mark beside it. (Use a highlighter or check it off on your statement too.) These checks have cleared the bank (been cashed) and are now accounted for. Do the same for any electronic withdrawals or payments listed. If you have not recorded any of these in your checkbook yet, do that now, then put a check mark beside them.
2. On your statement, look at the “Deposits and Other Additions.” In your checkbook register, look for where you recorded each deposit listed and put a check mark beside it. These deposits are now accounted for on both your checkbook register and bank statement. If there are any other additions, like interest earned, record that in your checkbook too. Then put a check mark by it. 
3. Fill out the Account Reconciliation Form below.

Account Reconciliation Form
Enter checkbook balance	$______________
ADD: Any deposits or other additions not entered in checkbook	$______________
Subtotal:	$______________
SUBTRACT: deductions not entered in checkbook	$______________
EQUALS: Revised checkbook balance:	$______________	*
Outstanding Checks   Outstanding Deposits Number Amount   Date Amount                                                                       total $   total $
Enter bank balance from statement:	$______________
ADD: Outstanding deposits not included in this statement (recent deposits you have made and recorded in your checkbook register, but they have not yet shown up on your statement)	$______________
Subtotal:	$______________
SUBTRACT: Outstanding checks (checks you have written, but have not been cashed yet, and thus have not shown up on your statement yet)	$______________
EQUALS: Revised bank balance:	$______________	*
* these two revised balances should be equal

 

Where to Look if Your Checkbook Does Not Balance

• Hunt for any addition or subtraction errors in your checkbook register. This is often where I find my mistakes.
• Look carefully at your bank statement again. Are there any items listed that you have not yet recorded in your checkbook register? For example: ATM transaction, debit card payment, electronic payment, or a one-time bank fee.
• Check to see if you have entered any amount more than once.
• Look for incorrect amounts or transposition errors (like $43.80 instead of $34.80). Recently my husband wrote a check for $51.23, but I read it as $57.23 in the register. 
• Take a break and come back to it later.
• Ask a trusted friend to help. Fresh eyes can sometimes spot an error we have overlooked.

HINT: Your checkbook register must record every transaction that has happened.

If you discover any errors, pat yourself on the back, and make a correcting entry in your checkbook register. You will eventually balance!

When you finish, write BALANCED on the last line in your register to which you have reconciled. Include the date too. This gives you a clear reference point when you are ready to balance the next time.
 
Now give a shout “Yes!” then get the ice cream and celebrate!

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Sandy Weyeneth is Navigator staff and works in Collegiate Communications.

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Basic Banking Terms

Checking Account – A bank account that holds money that you put in and allows you to write checks to pay bills or buy goods. You can also withdrawal funds from it to receive your money as cash.

Check – The numbered and pre-printed form from your bank that you fill out to pay someone. You designate whom you are paying money to, the amount, the date, and then you sign it, which authorizes payment. After the receiving party cashes your check, the money is deducted from your checking account.

Debit Card – When you pay with a plastic debit card, the amount is immediately deducted from your checking account. Many people like to use it instead of writing a check.

Deposit – Money added to your account using a deposit slip or a direct deposit (automated deposit directly into your account).

Balance – The amount of money you have in your checking account available to spend.

Withdrawal – Taking money from your account by using:

• ATM
• Withdrawal slip
• Check
• Automatic or electronic payment to an organization or business

Fees – When the bank takes money out of your account for things like:

• Monthly maintenance fee (on some checking accounts)
• Penalties (like an insufficient funds fee if you write a check but do not have enough funds in your account at the time to cover the check amount)
• Charge for printing checks
• One-time set up charge

Interest – Extra money you earn and the bank adds to your account for keeping your money in that account. (Sometimes there is a minimum balance required to receive interest.)

ATM (Automated Teller Machine) – A machine you can use 24 hours a day to:

• Deposit money
• Withdrawal money
• Transfer money

Direct Deposit – You can fill out paperwork authorizing a company (like your employer) to deposit funds directly into your checking account.

Stop payment on a check – If you wrote a check to someone and then want to stop it from being cashed, you can call your bank and ask them to stop payment on it. The bank cancels the transaction and the recipient will receive no cash if they try to cash that check. The bank charges a fee to stop payment.