Balancing a Checkbook

by David Ning · 8 comments

how to balance a checkbook

I just realized that I never balanced a checkbook nor do I even know what balancing a checkbook is. I always heard that it was very important to balance my checkbook but I never bothered to figure out what the difference was between my checking account and my credit card transaction list since I can log onto both online and see all the transactions.

Therefore, I did a bit of research on the topic and here’s what I found:

  • Balancing a checkbook is to make sure our records matches the banks since they can make mistakes
  • It is to also make sure our records are correct so we don’t write a check with money we don’t have as bounced checks means a $25 or more fee from the bank

So, the next question is – How do I write one?  Here’s the answer.

  1. Record all deposits and checks (the accounting term is reconcile but let’s just keep it in simple terms)
  2. Make sure to do the same with ATM and debit card purchases as well as ACH and wire transfers.  Basically, record all transactions related to the checking account including interest payments if there are any.
  3. Calculate the balance.

Note: When I was reading different articles, I also saw authors mention about outstanding checks, ATM and debit card purchases.  In this day and age, all we need to worry about is the outstanding checks since all electronic transactions are recorded to our accounts instantaneously.

Okay, I’ve never done any of this but everything has been fine.  Here’s my version of balancing my checkbook and explains why I don’t need to balance my checkbook.

  1. Stop writing so many checks.  There’s almost no more reasons to write checks anymore with electronic bill pay.  The less paper is used, the easier it is to keep track of our accounts.
  2. Look up the transaction history and make sure the records are correct.  Look at every transaction and make sure it is accounted for.
  3. I control my checking balance extremely tight because it doesn’t provide any interest.  Therefore, it almost forces me to look at the balance and transactions on a regular basis so I don’t fall behind.

So, now I know what balancing a checkbook is and so do you.

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{ read the comments below or add one }

  • Jonathan says:

    It’s a great tip. I remember once that my bank has made a mistake and unless I’d actually checked my account I would have been $150 dollars out of pocket. Just goes to show that failing to balance you checkbook can be costly.

  • Steve says:

    I use an iPhone app to balance my checkbook. It’s called Accounts2. For Dan Root, I had the same problems but this app features recurring transactions which I use for my car payment, Dunkin Donuts, gym membership etc. Just input it once and it’ll automatically appear every month. Also, my fiance and I have the same financial planning background and we’re able to share transactions in joint accounts. For $1.99 it’s not a bad deal at all.

  • Hs McD says:

    hey hey, the less you write a check, the less tree is being chopped down…r u a green protector supporter?? lolz

  • Dan Root says:

    I find balancing a checkbook is becoming harder and harder, because I have so many automated transactions (Gym membership each month, monthly bank fee, online accounting software, etc.) that hit my account each month, so no matter what my checkbook says, I am always left wondering when/if my fees have hit yet.

    While I do balance things out and keep track, it just makes daily balancing of a checkbook almost impossible. Besides, who uses a checkbook nowadays anyway?

    I think the smartest alternative (that I have found) is to request an ATM only card (NOT debit card) and take out cash anytime you need it. This gives you a realistic sense of how much you are spending and each time you make a transaction, you are shown your balance at the end on a receipt.

  • I must say this is a very interesting idea the thought of which is disturbing to me. LOL. I have always balanced my checkbook and feel horror when I’ve heard of friends that don’t balance their accounts for months, or ever. I use Quicken now, which makes it easier. But I always feel a lot better knowing that I agree with what the bank says I have in my account. I do also work in accounting and we have to check one thing against another just to make sure we have everything correct. And like first commenter mentioned, I find it very common for the gas stations to charge $1 or nothing at all, for days at a time. Just *last night* Mr. A told me he charged gasoline on the 12th, and there were no signs of it in the account. Not even the dollar. Now with the price of gasoline, you’d think they would be charging my account the instant I finished putting another $50 into the tank. I found your blog at the 153rd Carnival of Personal Finance.

  • Dividend Growth Investor says:

    I used to be a treasurer for 2 not-for-profits. Balancing a checkbook was important as well as keeping detailed supporting documentation behind every transaction.
    This experience, although menial ( the checkbook balancing that is) did provide me with some sound background to grow my personal financial education…

  • Mike Huang says:

    My wife does the balancing, so I’m safe for now 🙂

    -Mike

  • Scot says:

    Hello David,

    Please let me amend the “all transactions are instantaneous” line.

    When you purchase gas with your debit/credit card it will charge $1 to your card to make sure the card works well, then later in the day or even the next usually charge the full amount… keep this in mind when making gas purchases.

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