- Avoid unnecessary fees and overdraft charges
- Spot financial mistakes and prevent fraud
- Analyze spending to support budgeting and savings goals
One of the best ways to get your finances in order is to balance your checkbook regularly. But for many Americans, balancing your checkbook is akin to getting a root canal. People think it might be painful or frustrating, especially if they're not particularly fond of math. But the good news is that, with online banking and smartphone apps, reconciling your account is easier than ever.
Why balance your checkbook?
Managing your money is important to your economic well-being, and it starts by controlling how funds flow through your account. It's not enough to simply check your balance online here and there. At the very least, you need to verify that all the transactions you make are recorded correctly by your bank every month. Even if you typically have ample funds in your checking account, there are still a number of reasons why balancing your checkbook is a vital task. Here are seven of them:
- You can monitor your bank. By balancing your checkbook each month, you ensure that your balance matches your bank's records. Yes, even in this day and age, banks can make mistakes -- and this is the way to catch them. When you typically have only 60 days to catch a banking error, maintaining a regular schedule for balancing your account becomes critical.
- Overdraft fees add up quickly. Returned checks can be costly, typically $25 or more for each. By balancing your checkbook each month, you're less likely to bounce checks or incur low balance or overdraft fees.
- Problem-solving is easier. When a banking problem does arise, you will have no clue where to start investigating if you haven't balanced your checkbook recently. Those who make the effort to reconcile their registers regularly can simply look at the month's transactions and quickly see what is causing the discrepancy.
- Merchants make mistakes too. Most companies are honest; but like banks, they can make mistakes too. By balancing your checkbook, you can verify that the amount charged for a product or service is what you expected.
- The opportunity for fraud is multiplied. Between debit card transactions, online purchases, and ATM withdrawals, the ways you can spend money have increased - and so has the opportunity for someone to hack your account or steal your identity. Because of this, balancing your checkbook has never been a more important step in helping to identify fraudulent transactions.
- It can help with budgeting. Keeping a close eye on the transactions in your checking account can also provide useful insights for how to budget your money. It helps to know exactly what your balance is to help control cash flow and reduce expenses. Analyzing your income and expenses is much easier, especially at tax time.
- It can support your savings goals. Managing your checking account balance routinely could help you save money on banking fees and prevent fraudulent transactions from ravaging your account. Coupled with the habit of budgeting, you might even find extra funds to add to your savings account on a regular basis.
Still not ready to pick up your register?
Here are some ways to make balancing your checkbook easier each month:
- Keep your register up to date. Make sure all transactions, including deposits, debit card purchases and cash withdrawals are accurately recorded in a timely way. If you write checks, consider the carbon-copy checkbook that makes a duplicate record. That way you can verify the amount deducted from your account is correct.
- Don't forget automatic bill payments and direct deposits. Keeping a separate list of these transactions will make them easier to track.
- Take advantage of automatic checking account alerts. These alerts, now offered by many banks, will send an email or text if there is a problem with your account.
- Switch to online banking. Reviewing your bank statement online can make reconciling differences much easier; but in general, online banking is so much more convenient, safe, and even less expensive.
You may not relish balancing your checkbook on a regular basis, but it can help you save money and prevent future headaches - and that may just add to your peace of mind in the long run. Make it a point to get in the habit and reap the financial benefits all year long.