Tips for balancing the checkbook

One of the most important financial things you should be doing each month is balancing your checkbook. While it may seem like a chore, doing so can save you a lot of hassle and even money in the long run.

Balancing your checkbook has a number of advantages, including verifying that your records match your bank's; after all, even banks make mistakes every now and again. Failing to balance your checkbook or posting a transaction can give you an inaccurate idea of how much money you actually do have in your account, which could lead to overdrafts and bounced checks and the heavy fines that go along with them.

The following are some tips for balancing your checkbook:

Make sure you record each transaction. This includes withdrawals from ATMs, automatic withdrawals via auto bill pay, and purchases made with your bank card. If you do not have your checkbook with you, make sure you save the receipt and record it immediately when you get home.

? Balance your books once a month. This will give you a good idea of where you stand each month.
? Reconcile your checks. When you begin to balance your checkbook, start first by reconciling your checks. This means determining if you have checks that have yet to clear, and checks that have already cleared. List them in your register, comparing the amount listed with the amount on your bank statement.
? Reconcile your deposits. List each deposit in your register, including direct deposit paychecks. Compare them with your bank statement to ensure they are the same.
? Reconcile withdrawals and debit card purchases. Next, compare all of the ATM withdrawals and purchases you made using your debit card with those on your statement. Make sure you write down in your register any withdrawals and purchases on your statement that weren't recorded in your register.
Don't forget interest and bank fees. Make sure you add in the interest you have earned on your accounts each month in your register, in addition to any fees you may have been charged by the bank (including overdraft or stop payment fees.)
Make a list of your outstanding deposits and checks. IN the second column of your register, list any checks you have that have not yet cleared the bank. This goes for ATM purchases as well, as these are not always immediately withdrawn. Do the same with outstanding deposits, including any checks you may have deposited that have holds placed on them, resulting in funds that are not immediately available.
Next, do all of the necessary addition and subtraction to come up with the total balance in your register, and then compare it with that of your statement. If they don't match, go through again and double or triple check for any mistakes you may have made. A decimal point off or transposing numbers are common mistakes that can throw your ending balance off. More often than not, errors are actually errors in math, not the bank's fault.
Consider using software. Money management software such as Quicken or Microsoft Money can make balancing your checkbook as well as handling your finances in general much easier.

Balancing your books each month is an important part of keeping your finances in order. The above tips will help you to keep your books balanced accurately each month, giving you a better idea of where you stand financially.