Admittedly, checks and checkbooks aren’t as popular as they were in the past, when they were a standard way to pay for life’s daily expenses. But that doesn’t mean that balancing a checkbook isn’t still a valuable skill and an important way to keep your budget in good shape.
It’s a smart idea to keep tabs on how much is coming into your checking account and how much is going out. This helps you avoid bouncing checks (and paying those steep overdraft fees), spot errors and fraud attempts, and know how well you are doing in terms of spending.
Many people shy away from balancing (aka reconciling) their checking account because it seems as if it’s a time-consuming task and may require high-level math skills. Not true!
Once you learn the four steps of balancing your checkbook, it is a simple task that can be accomplished in a few minutes once every week or so. Read on to learn:
• What does balancing a checkbook mean?
• How do you balance a checkbook?
• What is the first step in balancing a checkbook?
• What are the benefits of balancing a checkbook?
What Does Balancing a Checkbook Mean?
The task of balancing a checkbook actually doesn’t have anything to do with the checkbook itself (the stack of checks you may write to pay for goods and services), although your checkbook register is still a great tool for doing the job.
Rather, balancing a checkbook refers to the process of reconciling and cross-checking the many transactions that occur in your checking account.
To summarize the process of balancing your checkbook: This involves recording all of your deposits and withdrawals on a regular basis, adding and subtracting them as you go, and then comparing your numbers to the bank’s to make sure they agree.
Benefits of Balancing Your Checkbook?
Balancing your checkbook, whether with personal vs. business checks, comes with a number of key benefits. These Include:
Knowing Your Balance in Real Time
When you log every transaction, you add to your balance if it’s a deposit or subtract if you’re paying a bill. In this way, you are able to know the true balance of your account, which may not yet be reflected online or in your app.
That’s because when you write a check against your account, the bank won’t deduct those funds from your account until the person you gave the check to deposits it.
Your bank app may show you have $2,000 in your account but if you wrote a $1,000 check yesterday, you actually only have $1,000 available to spend.
Tracking Your Spending and Sticking with Your Budget
During the balancing process, you look at every transaction in your checking account for a period of time, whether it’s a day, a week, or a month.
You might find that you’re spending more than you thought or taking out more cash from the ATM each month than your current budget allows.
Balancing your checkbook on a regular basis can help you monitor your spending, and help to ensure you’re able to maintain your savings goals.
Reviewing Your Account for Errors, Fraud, or Billing Changes
Regular reviewing and tracking of your account’s expenditures can help you immediately spot any purchases or transfers of money that you don’t recognize.
You may also pick up on fees your bank is charging that you weren’t aware of or that are new.
Or, you might notice that one of your auto-pay bills has gone up in price. If your payments are processed automatically without your review, those increases could go unnoticed and unaddressed for months, disrupting your cash flow and possibly causing other financial issues down the line.
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Are There Reasons Not to Balance Your Checkbook?
You don’t need to balance your checkbook if you are using and are satisfied with another method to keep tabs on your spending. For instance, if your bank offers an app that works well for you, fine. Or perhaps you are in the habit of monitoring your checking account regularly and feel comfortable with that process.
As noted above, however, there can be a lag time between when you write a check or even swipe a debit card and when the charge is actually debited. This may lead you to believe you have more money on deposit than you truly do. That may motivate you to balance your checkbook instead.
How to Balance a Checkbook in 4 Steps
Here’s an easy step-by-step approach to balancing your checkbook.
1. Recording Your Current Balance
Here’s the first step toward reconciling your checkbook register: logging your bank account balance.
• You can quickly find your checking account balance by going on your bank’s website or using its mobile app.
• If you’re using a paper checkbook register, you can then record this number in the top spot above the spaces you use to log your transactions.
• If you don’t have a register or prefer to go digital, you can create your own register on your computer, or use an open source spreadsheet platform, such as Google Sheets. An online spreadsheet has the advantage of being accessible anytime from any device.
That’s it for the first step in balancing your checkbook.
2. Recording Any Pending Transactions
The next step in balancing your checkbook involves recording transactions that haven’t fully processed yet.
• Account for any pending transactions. These are transactions that you know are coming, but have not yet cleared. For example, when you deposit a check (whether at a bank, ATM, or mobile deposit), your bank might release only part of the funds immediately, placing a hold on the rest of the money until the check clears.
Similarly, when you pay for something with your debit card or a check, the transaction may take a day or two to go through.
• You can write down the date of the transaction and a brief description and, if it’s a check, the check number.
• Do the math next: Starting with the first transaction you enter, subtract the amount from your available balance, or, in the case of a deposit, add it to the balance.
• Then record the new amount on the next line of your register. You can continue doing this until all transactions are reconciled. The final number is (ta-da) your current available balance: the actual amount you have in the account to spend.
3. Continuing to Record Transactions
Next, you can log transactions as they happen or at regular intervals.
• As you continue to make transactions, you can then record them in your register or spreadsheet so you have a running tally of your debits, credits, and current balance. You’ll want to account for both checks, debit card usage, and deposits to the account.
You can do this as you go, or you can collect your receipts and record them in your checking register or spreadsheet at the end of the day or week.
Recommended: Differences Between Current Balance and Available Balance
4. Comparing Your Numbers
Now it may be time for a little bit of cross-checking detective work:
• Once or twice a month, it’s a good idea to log on to your account and compare your bank’s total withdrawals and deposits and balances with your own records. If they match, you’re in good shape; you have a balanced checkbook.
If the numbers don’t align, you may then want to go back through your records, as well as the bank’s transaction history, to see where the discrepancy lies.
You may find that you forgot to record a transaction or you wrote down a number incorrectly, or made a simple math error. Or perhaps you forgot to account for account fees or a miscellaneous charge that was deducted.
Or you might pick up an error on the bank’s part, a change in the amount a vendor is billing you, or a potentially fraudulent charge. Generally, the quicker you pick up and address any discrepancies the better, particularly in the case of bank fraud or identity theft.
What Is a Check Register?
A check register is a compact booklet that acts as a kind of spreadsheet, helping you record transactions and tally your checking account’s balance.
These typically come when you order checks, or you can buy them at some retailers or online vendors.
Check registers can be a valuable tool in balancing your checkbook and staying on budget.
Is Knowing How to Balance a Checkbook Now Obsolete?
Knowing how to balance a checkbook may be less vital than it was in the past, but it is still an important skill for tracking incoming funds, outgoing payments, and your total amount of money on deposit.
If you don’t like the paper and pencil aspect of balancing a checkbook, you can use apps and digital tools to keep tabs on your funds.
Digitally Balancing a Checkbook
If you are the type of person who doesn’t like writing down numbers and calculating your available balance on paper, you can use digital tools to help the process along.
There are apps that promise to help you balance your checkbook, but some involve a fair amount of data entry. Your financial institution may offer tools (online and in an app) to help you check your balance, see charges, view pending transactions, and more. For many people, these can be a way to keep tabs on their account balance.
Opening Checking and Savings SoFi Accounts
Even in an increasingly paperless world, it can still be important to balance your checkbook.
Regularly balancing your checking account can give you a clear sense of not only how much money is in your bank account, but where your money goes.
This can help you track your spending, avoid bouncing checks, detect billing changes, and also spot errors or even fraudulent charges as soon as they happen.
If you’re looking for an easy way to keep tabs on your money, you may want to sign up for a new bank account with SoFi.
With SoFi Checking and Savings, you can get all the numbers you need to track your finances at a glance and on the go using the SoFi app. Plus, you’ll earn a competitive annual percentage yield (APY) and pay no account fees, which can help you money grow faster.
See how easy it is to manage your finances with SoFi Checking and Savings today.
FAQ
Is balancing a checkbook still necessary?
While balancing your checkbook isn’t as common as it was before, it is still a valuable way to keep tabs on the money in your checking account, spot errors, and identify any suspicious activity. It is also a wise move if you are trying to stick with a budgeting method and avoid overdrafting your account.
How do you balance a checkbook that hasn’t been balanced before?
You can start balancing your checkbook at any time. View your balance online, and log it in your checkbook. Account for any pending transactions, and then, going forward, note deposits, withdrawals and other debits, plus any fees that are taken out of your funds.
How often should you balance your checkbook?
It can be wise to balance your checkbook in real time. That means, it can be smart to note any checks you write as you do so, and log debit card transactions as they happen so you don’t forget about them. For some people, though, this isn’t convenient, and they prefer to spend a few minutes reconciling their checkbook once or twice a week. The choice is yours.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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