How to Balance Your Checkbook

How to Balance Your Checkbook

Many of us use our checking account to pay for life’s expenses, including utility bills, rent or mortgage, food, and luxuries like a gym membership. There are a variety of approaches for keeping tabs on your funds to ensure you accurately account for all your income and expenses.

Physical checkbooks usually come with a check registry: A small booklet designed to help you keep your transactions organized by providing spaces to record your income and expenses so you can see at a glance where your revenue comes from, how you spend it, and your bottom-line balance.

Most check registers include these details:

• check number 
  
• date
  
• transaction description
  
• debit (-)
  
• credit (+)
  
• balance

Sure, monitoring how much money is going into and out of your account via paper checks and financial statements may be fading away in favor of online banking. However, the same basic principles apply to balancing your checkbook, whether on paper or online. 

What Does ‘Balancing Your Checkbook’ Mean?

Balancing your checkbook is a way to track your income and expenses to ensure your financial transactions are equal (or balanced) between your own records and those kept by your financial institution. 

Keep in mind that debit cards and digital wallets, such as Apple Pay, Venmo, Zelle, and PayPal, are often tied to your checking account. With so many ways to pay for goods and services — some potentially vulnerable to hacks and fraudster attacks — it’s more important than ever to know how to balance your checkbook and be aware of your balance and any apparent inconsistencies.

The Importance of Balancing Your Checkbook

Balancing your checkbook helps you avoid spending more money than you have in your account. And although many credit unions offer no-fee checking accounts, you may need to maintain a minimum balance to take advantage of that perk. Monitoring your balance will ensure you keep enough money in your account to avoid paying unnecessary fees. For example, fees for bouncing checks can range anywhere from $20 to $40 bucks.   

Balancing your checkbook also helps you manage automatic payments for bills and subscriptions. These often “out of sight, out of mind” arrangements might not get the same attention as your manual payments. But ready or not, the money to pay those bills will come out of your checking account as scheduled, and if your fund balance falls too low on the due date, those payments might not go through.

Your financial institution likely offers online banking. If you haven't already, be sure to sign up for it and use it to check your statements regularly, even if you're confident there are more than enough funds in your account to cover your expenses. By regularly monitoring your checking account, you are much more likely to discover financial errors or fraud in time to flag them and recoup any associated losses.

Paying close attention to your checking account and reviewing it regularly will also help you with budgeting and setting financial goals. When you can see exactly where your money is going, you can act to eliminate any expenses you don't need or want.

8 Steps to Balancing Your Checkbook

Balancing your checkbook doesn't have to be complicated or time-consuming. Simply follow these eight steps, and you will soon notice the benefits of more active financial management.

1. Gather your financial information 

Before you start balancing your checkbook, locate your financial statement for the month just ended and round up the records of your transactions — paper or emailed receipts for both online and in-person purchases. At the same time, gather records of your income for the month — paychecks, gifts, tips, or any other money deposited into your account.

2. Choose a method for balancing your checkbook

There are a variety of ways to balance your checkbook. You can go old school and use the register that came with your paper checks or turn to a simple ledger or spreadsheet. If you prefer a paperless method, phone apps like Empower or YNAB are convenient tools, especially if you link them to your checking account. Accounting software such as Quickbooks, Quicken, or Freshbooks are other options. 

Remember, a financial consultant at your local credit union will be happy to advise you on the method for balancing your checkbook that best suits your needs.

3. Record all transactions

To record all your transactions in your check register, include the check number (if applicable), the date, the payee, the amount you are paying, and the purpose of the transaction. 

Also, record any withdrawals or debit card payments you make from your checking account. Include special notes such as payment confirmation codes and the purpose of the expenditure using specific categories such as groceries, utilities, rent, dining out, etc.

Keep a running balance of deposits as well. This will ensure you haven’t forgotten a transaction when the time comes to do your monthly account reconciliation. 

4. Update your transaction tracking tool

Tracking your financial transactions on an app is a convenient way to both receive money and make payments, but don’t take that convenience for granted. Make sure you maintain them by downloading the latest versions and updates. Updating your transaction tracking tools will help ensure you won't lose any records, and the app will continue functioning correctly on your device. Regular software updates will also enhance security features and guard against cybercrime.  

5. Reconcile with financial statements at least once a month

One of the most important fundamentals of balancing your checkbook is reconciling with your statements each month. Here are the basic steps:

• When you open your statement, either the hard copy or online, compare it to your check register by checking off each transaction as you verify. Take note of any checks or other transactions that have not cleared your financial institution.
  
• Add any accrued interest and subtract applicable fees.
  
• Make sure the ending balance in your check register matches the ending balance on your statement.

6. Address any discrepancies

The balances on your checking account register and your financial statement should always match, but occasionally, you may notice differences. When this happens, check your log to see if one of your withdrawals or deposits has not cleared, if your financial institution has a record of a transaction not recorded in your register, or if any transaction amounts don't match up. Also, check for potential math errors you might have made.

If you believe an error has occurred or suspect fraud, don't hesitate to contact your financial institution immediately.

7. Automate the process

Online tools can make balancing your checkbook a breeze. For example, many credit unions offer online calculators to help you add up your expenses and income and enable you to pinpoint discrepancies, saving you time and frustration.

8. Monitor your financial goals

Not only is a checking account a convenient way to hold and access your funds, but it is also an excellent step in creating a healthy financial future.

Smart money management practices — like balancing your checkbook — are key to setting and reaching financial goals. When you adopt the habit of monitoring your transactions, you will notice you may be inadvertently spending too much money on things you don’t need or have forgotten about, such as streaming entertainment channels, online publications, or monthly services and subscriptions.

Keeping track of your finances will enable you to avoid overdraft fees and maintain minimum balances. Over time, you may notice you are accumulating money in your checking account. This would be a good time to seek opportunities to keep excess funds in higher interest-bearing accounts. 

The financial experts at your local credit union can help you navigate the many available options.

Further Resources on How to Balance Your Checkbook

Here are some additional resources on how to balance your checkbook.

• Take advantage of learning tools. The National Credit Union Administration’s Money Basics Guide to Savings and Checking Accounts provides guidance on the benefits of checking and savings accounts at credit unions.
  
• Avoid overdraft fees. The Consumer Financial Protection Bureau provides tips on the best ways to prevent the overdrafting of your checking account.
  
• Know your checks from front to back. MyCreditUnion.gov gives a detailed report of every item on a check and how they impact your efforts to balance your account.

Credit Unions Offer Solutions to Help You Stay on Track

With a balanced checkbook, you have the power to relax, knowing you have enough money in your checking account to enjoy dinner with friends, make a long-awaited purchase, or even save money for a rainy day. 

Now that you’ve got the basics on balancing your checkbook, head to your local credit union for even more advice on how to make the most of your checking account. Use our handy Credit Union Locator Tool to find a branch near you.

Did You Know?

Balancing your checkbook is an important step in managing your money. Not-for-profit credit unions not only make your money go further with some of the best rates around, but they also provide exceptional member service, convenience, and lower fees than most for-profit national banks.