Balance your checkbook today for a better tomorrow

The cashier scans the last item from your cartful of purchases. As you pull out your debit card to pay, a small voice in your head asks, “Do I have enough to cover this?”

You probably have a rough estimate in your head. Maybe you checked your bank account balance on your mobile banking app as you walked into the department store. Or perhaps you have your checkbook along.

Many Americans survive from month to month without balancing their checkbook. But here’s the key: They might be surviving, but are they thriving? If you take the time to understand how to balance a checkbook, it can really pay off. At first, this can help you feel more confident about where your account stands when you run to a store. Over time, paying attention to your spending and tracking where your dollars are going may begin to feel so natural, you won’t even have to think twice about it.

The more you understand the process, the more comfortable you may feel about managing your money. Balancing a checkbook can be just the thing you need to propel you into a better financial future. Keeping careful records may inspire you to start saving a little more, investing and building a nice financial safety net.

But what do terms like “balance,” “checkbook” and “register” even mean in today’s online world? When balancing a checkbook, it can be useful to start with some definitions.

• Balance: This is the amount of money you have in your account.¹ You can usually check your bank account balance online. Keep in mind, however, that the balance might not reflect some of your most recent purchases, which may still be processing. That’s why it’s a good idea to take note of your “available balance.” That’s the amount you have available to use. The bank has already deducted charges that are still processing, which can help you avoid spending more than you actually have in your account.
• Checkbook: A small booklet that has checks you can use to pay bills, make purchases and more.² Checkbooks still exist, but not everyone knows how to use a checkbook. While you might not get a physical checkbook anymore, online banking usually allows you to do the same things and get the same benefits.
• Checkbook register: A tool that lets you record when and how much money comes into or is taken out of your account.² They often are included as part of a checkbook, but you could also use a separate notebook, an app or a spreadsheet to track things. Regardless of what tool you use, it can be helpful to make sure all your money’s movements are listed in one spot. If you take out money at an ATM, you can list that withdrawal in the register. If you write a check or use a debit card, that amount can be written in the register, too. The same is true when you cash a check or add money to the account.
• Transaction: This refers to every time money comes into or goes out of your account.³ So when you get paid each month, a transaction occurs as the funds are put into your account. If you buy a coffee, a transaction takes place as money is transferred out of your account to the merchant you purchased coffee from.
• Statement: This is a document from your bank. It’s usually mailed to you, or sent to you online, each month. It shows the transactions that occurred in your account during a certain period, usually the previous month.⁴ A bank statement will include a closing date. This refers to the last day the bank recorded transactions before sending you the statement.
• Reconcile: While it might seem like an odd word to use in banking, it simply means to compare the bank’s records to your own.⁵ Think about it like this: You track your income and spending, and so does the bank. Every so often, you get a chance to make sure the two records match up. You can use the statement from the bank and your checkbook register to do this.
• Insufficient funds: You may hear this term if you write a check or try to make a debit card purchase for an amount that is greater than what you have in your account.⁶ Say you have $100 in your account. If you write a check for $150 to buy a new office chair, there will be insufficient funds in your account. In other words, you don’t have enough to buy the furniture.

Balancing a checkbook consists of checking that your records match up with what the bank has for your account. It’s a chance to see how your money came into the account and where it went. You can also see if you missed accounting for any of your expenses in your budget.

As you balance a checkbook, you will likely pick up on habits that can help you budget for the future. For instance, if you see that you spent $50 at restaurants during the last month, you’ll be able to assume that you might spend that much again during the coming month or decide that this is an area where you can cut back. The point is to help you stay on top of your expenses so you can budget successfully.

1. Look at the statement. When your statement arrives in the mail, or you get a notice that your online bank statement is available, open the document.
2. Locate your checkbook register. Remember, this is your record of what money came into and out of the account. It can be helpful to keep all your records in one place, whether that's on paper, in an app or on your computer. Take some time to compile all of your information in one place.
3. Compare the two. This involves looking through the bank’s list of transactions from your account in your statement, also known as reconciling. Say the bank notes that you spent $23 on groceries, and you have that same amount listed in your records. After seeing that the $23 is listed in the bank’s records and your own records, put a mark by it. This might be a checkmark with a pencil, a note or mark made in the app, or a highlighted row in a spreadsheet.
4. Subtract from your records if needed. You might find the bank has charged a monthly maintenance fee for your checking account. If you didn’t record it in your register, subtract it from your records to get a current balance. The same is true for other transactions. Maybe you made a quick ATM withdrawal you forgot to note in your register. If the bank lists it, subtract it from the balance in your records to get an accurate number.
5. Adjust for pending transactions. Look at the closing date on your statement. If you made any purchases after the closing date, you’ll want to add those back to your recorded balance. And if you had any money come in after the closing date (cha-ching!), subtract those from your records. This will get you closer to a balance in your records that matches the bank’s balance.
6. Look for errors. If the amounts still don’t line up, there may be a mistake. Scan through the records to see if a number is recorded wrong. Also look for transactions you don’t recognize, which could indicate fraud (if you see something shady, let your bank know).

Making the balancing act a daily habit only takes a few minutes. To get started, you might consider methods you’re already comfortable with. If you like to use your phone for everything, it may work to use an app to check the bank account balance each day. You could also decide to set up alerts to let you know when transactions occur.

You might also want to keep track of your own records. Try your best to note every time you make a payment, even if it’s for a small amount. Once you’re used to the recording process, pay attention to how you’re spending your money. This will help you identify any changes you want to make.

Then, set aside a little extra time every month to balance your checkbook. If you bank online, you’ll have easy access to your account and statement. As you grow comfortable balancing your checkbook, it might be easier to think ahead. Are there some savings goals you have? Would you like a transaction to be made every month that deposits some of your income into a savings account? What about other investments you can start and track? The possibilities are nearly limitless.

Here’s to more confident shopping trips and a solid financial future.