The essential management task of balancing one’s checkbooks is not taught in most schools, leaving many young adults struggling to maintain their checking accounts. Companies and business owners could look for fractional CFO services and a team of accountants to manage their finances, but for households or individuals, learning to balance a checkbook is one of the best ways to keep track of your cash flow.
Whether you’re starting on your own, setting up your first bank account, or want to learn how to manage your finances better, you could do the following things to ensure maximum savings.
Determine Your Current Balance In Your Checking Account
The current balance or actual balance is the total of all your posted and cleared transactions your bank is aware of, and it doesn’t include pending transactions. Figuring out your current balance is the first step in balancing your checkbook. Your bank may also list it as ‘available’ or ‘ending balance,’ and you can usually find it using your bank’s website or mobile banking application. Once you find the total amount, log it in at the top of your checkbook register.
Record All Pending Transactions
It’s wise to record any pending transactions you may have. Doing this helps you avoid any confusion along the way, as all transactions under this category don’t reflect on your available or current balance until payment is fully processed. Record every pending transaction in your checkbook register, including debit or credit cards, and checks you’ve written that are yet to be cleared.
When recording pending transactions, ensure you include their dates, descriptions, the total amounts, and if the listing checks, add in the check number. Some individuals use duplicate copy checks to ensure they have accurate records of who they issued a check to and its total amount.
Get the Total Amount for Each Transaction
Once you’ve recorded all the pending transactions, it’s time for you to determine the total for each one. Starting with the first transaction, you entered, subtract its amount from your current balance, and record the new total on the next line of the register. Continue to do this for all transactions.
Compare the Total Amount of Withdrawals and Deposits
Once you’ve gathered all the total amounts for all your transactions, including withdrawals and deposits, it’s time for you to compare them all. If the ending balances match the amount in your online or mobile banking application, what you have in your checkbook, and you’ve factored in all deposits and withdrawals made, then your checkbook is balanced.
However, if the balance is different, clear your head, go back to all the transactions, and see if you missed anything. You can start with your most current statement as a guide to get every transaction you have made so far.
If you want to ensure your checking account is accurate, commit to balancing your checkbook weekly because it keeps you up-to-date, and it’s easier to do than once a month. That’s because you need to backtrack to more transactions, leaving you with more to compute, making it more complicated than it has to be.
Balancing your checkbook is an essential habit that ensures good money management, yet millions of people don’t do it regularly, leaving them scraping by because of cash mismanagement. Luckily, following the steps above allows you to track and manage your finances seamlessly, ensuring optimal savings.