Important points
- To manage your checking account balance, you need to track your starting balance and all withdrawals and deposits, so you can stay on top of your balance.
- Tracking your withdrawals and knowing your balance will not only help you avoid overdraft and insufficient funds fees, but it will also help you quickly notice any mistakes or issues that need to be addressed.
- Checking your checkbook balance is also a great way to be fully aware of where your money is going to see if there are any areas you can save to increase your savings.
Reconciling your checking account balance may seem like a hassle, but tracking your spending and knowing your available balance can help you spot fraud, avoid overdrafts, and more. It helps you better understand your spending patterns.
The process of rebalancing your account simply involves listing your debits and credits (deposits and withdrawals) and adding them together to find your balance. It can be done using paper and pen or money management software.
What does it mean to maintain a checking account balance?
Balancing your checking account means listing all the withdrawals from and deposits into your account. In addition to each of these items, you will need to list your new account balance, taking into account any withdrawals or deposits.
To balance your checking account, you’ll need access to your bank summary in addition to your paper checkbook, spreadsheet, or budgeting app.
It is important to keep these types of records, rather than relying solely on the transaction history provided by your bank. This is because it may take some time for the bank to recognize that a check has been issued or a transfer has been made from your account. When rebalancing your checking account, deduct such transactions immediately to avoid spending the funds you’ve already committed elsewhere.
How to check your checking account balance
If you use a paper checkbook, rebalancing your account requires a few simple steps.
1. Write down the transaction in the checkbook
A checkbook comes with a register that allows you to record when money enters and exits your account. On the right side of each line is a place to calculate the new balance.
Hint: It is beneficial to record your transactions on a daily or every few days frequency. This will help you keep track of your balance and prevent you from accidentally overspending.
2. Reconcile the register with bank records.
To do this, log on to your bank account and view your transaction records or check your most recent bank statement.
Hint: Ensuring that your records match your bank’s records ensures that you don’t make calculation mistakes or forget to include transactions.
3. Update your account balance regularly
Always check your available balance in the check register. That way, you’ll know how much you have left before you go to the store, start paying bills, or writing checks.
Hint: Keeping track of your bank balance can help you quickly determine whether you can afford to make an impulse purchase at the store or whether you should skip that last-minute dinner at your favorite restaurant.
Using a spreadsheet or app requires a similar process, but with the added benefit of technology that automatically adds and subtracts. This ultimately makes your work faster and leaves less room for error.
Why is it important to balance your checking account?
The benefits of balancing your checking account are tenfold, and the process is easy to incorporate into your daily life. This exercise will help you:
- Avoid overspending and overdrafts
- Recognize bank mistakes or your own accidental omissions and miscalculations
- Identify bank fraud quickly
- Check bank fees and decide how to avoid them
- Easily find out if you can make a particular purchase or if you should refrain from making a purchase
- See if you have money left to transfer to an interest-bearing savings account
Here we will discuss some of these benefits in detail.
1. Checking account reconciliation
Checking account reconciliation means checking all the transactions in your records against your bank’s records to make sure they match. This will help you spot any mistakes on your or the bank’s part.
Before computers, reconciling checkbooks required manual tracking and calculations, but now banking apps and budgeting software can do all the work, and much more quickly.
The app helps you track your transactions and provides a simple dashboard to use when reconciling your account.
2. Fighting fraud
Another reason to balance your checking account is to check for fraud. When you’re reconciling your account, if there’s a difference between the balance you expect and the balance your bank says is in your account, it’s not necessarily the bank’s fault.
Even if fraudsters gain access to your account, they may not be able to compromise your account right away. Instead, they can slowly siphon your funds without you even noticing. Reconciling your account regularly can help you spot and stop these transfers.
3. Track bank fees
Bank fees may apply, including periodic maintenance fees and out-of-network ATM fees. The way banks report fees on your statement can make some fees difficult to track. For example, a bank may report a $20 withdrawal with an associated fee of $3 as a $23 withdrawal.
Balancing your checking account will show you how much you’re actually paying to use that account, which may prompt you to switch to an account with fewer fees.
4. Track your spending
Budgeting requires diligence. This involves creating a plan based on your spending habits and tracking your spending to make sure you’re on track.
Balancing your checking account helps you keep track of your spending since you have to confirm every transaction. This will help you identify areas where you are overspending and areas where you can cut back.
When writing checks, it’s also important to track your spending. If you write a check for $500, the money stays in your account until the check is cashed, which could take days, weeks, or longer, depending on who drew the check. Meanwhile, you might forget about it and think you have $500 more than you actually have. If you spend that money, your account may be debited once the check is cashed.
5. Discover mistakes made by banks
Bank errors are rare, but they do happen from time to time. Balancing your checking account and monitoring your transactions will ensure that you can spot and correct any mistakes.
In addition, rebalancing your account can also help you find and correct instances where merchants accidentally double charge you or charge you the wrong amount for goods or services.
6. Get the latest information about automatic payments
If you don’t balance your checking account regularly, it’s easy to forget where your money is going. Reviewing your transactions allows you to stay aware of what’s impacting your finances and make changes if necessary.
For example, you may have recurring charges for things you no longer use, such as gym memberships, streaming services, or magazine subscriptions. Identifying and canceling such charges can give you more money each month to cover necessary expenses or build up an emergency fund.
conclusion
It’s important to keep track of your spending so you don’t overdraw or overdraw your checking account. The best way to be aware of your account balances and spending habits is to balance your checking account. This process is not difficult to manage if you perform it regularly. Spreadsheets and budgeting apps can make it faster and easier.
In addition to the practical benefits of balancing your checking account, being able to better manage your spending may also help you sleep better at night.
