Why is it important to balance your checkbook regularly?
When we turn 16, we cannot wait to take our first driver’s course. We have been eyeing the family station wagon for years and can’t wait to get behind the wheel. Our parents spend several hundred dollars to make sure that we get enrolled in an eight week driving course. We slowly find ourselves getting behind the wheel of an expensive automobile in hopes of having our license within a few months. Once, we have successfully completed the course, we take our test and move in to the driver seat of getting ourselves from point A to B. Some of us were lucky and our parents had budgeted for a car along with that driver’s course, so there was no need to learn how to park the big wagon mobile in the school parking lot. Wouldn’t it be great if our parents had also shown that much care in teaching us to be financially fit for life?
Most of us/our spouse earn money by working outside of the home to ensure that we have the things that are needed for our basic care. At the end of each pay period, we look to our employers to afford us with the funds that we have earned that pay period. In order for a company to reward us for work well done or in some cases not so well done, it takes planning and budgeting.
A household runs the same way. You have to plan and budget to ensure that your household runs smoothly. Some of us run our house like a company budgeting for the things that we need and want to have, such as a nice home, cars, and expanding the family.
Expanding a family can be a financially challenging task. As you look to expand your family, you look at your budget to ensure that you can add another person to your household and still continue to plan for future endeavors. This process is similar to a company; they look at the budget when searching for new employees.
One way to ensure a smooth running household is money management. One of the basic forms of money management is knowing how much money you have coming in and how much that you have going out. If you know how much money you have coming in and going out you are able to:
- Easily budget for bills
- Save for the future
- Plan for life events
- Manage your household
The most basic form of managing your money is keeping a checkbook.
Did you know balancing your checkbook can be the difference between eating chicken on Friday or ramen? Balancing your checkbook is one of the most basic habits for better financial management. Believe it or not, this is not performed routinely by most people in the world. There are some financial advantages to balancing your check book.
- Verifications to your financial records.
- Helps to keep track of your spending
- Helps to keep track of the money coming in and going out of your account
- Knowing your balance, helps avoid bank fees
With the advancement of technology, the process of managing your finances electronically appears to make it easier to watch over your accounts and financial health. Even with technology advancements, it is still important to keep a check register and write down all your bank needs. The electronic version of your account does not have the technology to immediately show:
- Handwritten checks that are pending
- Checks sent through bill pay that are pending
- Check card charges that are manually processed
- Scheduled debits that have not been pulled from the account
Each month, it is important to reconcile your bank records. Having a check register that is up to date can assist you with balancing your accounts. From time to time, your bank can make mistakes and accurate record keeping on your part could ensure a smooth transition in getting this mistake fixed quickly. And if you don’t keep accurate records of your finances, mistakes can go unnoticed. A bank processes hundreds of transactions daily and while mistakes are rare, they do occur. If your records are in shambles and you are the victim of a mistake, you are giving away your hard earned money. Can you afford to do this?
Most financial experts advise balancing your checkbook immediately after a transaction and reconciling your accounts every month as it saves time and also prevents errors from going unnoticed. We know that adding details to your account immediately may not always be convenient. What to do in that instant?
- If vacationing, take a small zip lock bag and put all receipts in the bag
- Keep all receipts in a special compartment of your wallet or purse
- Send yourself a text with each transaction
- Keep a small pad in your purse/write down all transactions and enter them at the end of the day
We have focused on banks making mistakes but, at times, merchants can make mistakes as well. Balancing your account ensures those errors are noticed as well. If you found that you have been overcharged by a merchant make sure you contact them immediately. Speak with a manager; write down the names of each person that you speak too. If they promise to credit your account, set up a date and time to follow up with the manager if the credit does not go through. If you set up a date, make sure that you call on that date.
Balancing your checkbook ensures that you keep accurate records of your bank account and your spending. A check register, which is up to date, will help you monitor all transactions from ATM withdrawals, checks, deposits and debit card transactions.
The way you budget your finances is very important to everything you attempt to accomplish. Check book balancing offers significant insights on how to manage your money. It gives you insight on what funds are available from different activities.
Not balancing your checkbook on a regular basis can lead to mismanagement of funds because you have no way of tracking what outstanding debit you have pending. It you don’t know what debt is outstanding, you could bounce checks. Returned checks can be very expensive. Some bank charge fees are upwards of $40.00 per returned transaction. You could also end up owing the merchant as well for return fees. Balancing your checkbook helps ensure a healthier financial future as well as peace of mind.