Do you balance your checking account everyday and reconcile once a month? If you don’t, it may be costing you money that you can’t afford to loose in this tough economy. Balancing a checking account regularly helps you keep track of funds and can prevent unexpected debits from putting an account into overdraft. In a tough economy, knowing exactly how much money is available will help keep a person financially afloat.
Checkbooks should be balanced every day, and reconciled with the Bank Statement every month.
So what’s the difference between the two? To balance a checkbook means to subtract the checks written that day from the remaining balance in your checking account. This can be done using the checkbook ledger or a home financial program such as Quicken. Balancing means that you know exactly how much money is in the checking account before hitting the grocery store or the mall.
Reconciling is done once a month and is a system of double checking your balance against what the bank says in the account . A checking account should always be reconciled against your monthly bank statement. This statements list the deposits for the month, the bank fees charged, interest rates, checks written, automatic payment deductions, debit charges and other costs.
When you are living from paycheck to paycheck, all it take is one simple mistake or a forgotten cash withdrawal to start a chain reaction of bounced check charges that are difficult to stop.
There are many good reasons why balancing and reconciling your checking account will improve your financial well-being:
1. Balancing a checkbook everyday keeps you current on your available balance. Balancing a checkbook tells you how much money is left for groceries, gas, and other expenses to avoid bouncing a check. Balancing takes into consideration what checks have not cleared yet.
2. Reconciling can identify simple math errors such as duplicate deposits or deductions, transposed numbers, or a check you forgot to record.
3. Reconciling your bank statement and checking the balance on-line alerts you to unauthorized deductions from your account, annual membership payments you may have forgotten about, and other charges you weren’t aware of.
4. Reconciling can also help identify wrong deposit amounts or mistakes that the bank has made. It is always much easier to catch and undo a mistake as it happens rather than waiting several months.
5. Reconciling and checking your on-line balance frequently can help minimize damage caused by identify theft.
While balancing and reconciling a checking account can be a bit of a hassle, it’s an important step in taking control of your financial well-being in this tough economy. Avoiding this simple task can result in bounced checks, damaged credit, and the start of a cycle of overdraft charges that could wipe out an entire paycheck.