I was on a training call a few months ago that mention this and then a friend of mine told me recently that most people don’t balance their checkbook registers to their monthly bank statements. I don’t know if it’s that they don’t think it’s important or that they don’t know how to do it but not balancing it each month can end up costing you a lot of money in overdraft charges if you’ve omitted a check/debit charge or have a major error in addition.
With the end of the year quickly approaching which means tax time is right around the corner, you might want to consider starting to get your financial paperwork organized so that when you have to get all your expenses ready for your tax preparer, you’ll at least know that your checkbook is correct and you can have easy access to it and any charges that are tax deductible. To that end, here is are the simple steps to balancing your monthly bank statement.
Step One – Go to your bank’s website if you haven’t received the statements by mail and download and print your bank statement for the last month (if you’ve never done it I recommend just going back the last 6 months at the most). Write down the ending balance of your checking account from the statement on a separate piece of paper.
Step Two – If you don’t keep a running total in a register in your checkbook, get one and start now. Start from the oldest statement and copy the transactions into the register. You can use any calculator – even the one on your phone – to do the addition and subtraction. If you have been keeping a register with all of your transactions with a running total go on to Step Three.
Step Three – Work from the oldest statement that you printed first and work forward and start checking off each check, debit transaction and deposit both in the check register and on the statement itself. If you find an entry on the statement that you don’t see in the register, just highlight or circle it so you can come back to it later.
Step Four – Now that you’ve gone through and checked off all the corresponding entries you can go back to those that you highlighted or circled in Step Three and do a little research on them. Is it a legitimate charge? Do you remember the purchase? Is the amount off from what is on the statement? If you still have the receipt you could check it to make sure of the amount. If it was missing from your register and it is a legit charge enter it now and deduct or add it to the total. Are they bank fees that need to be deducted from your check book? If so, deduct them now.
Step 5 – Once you have all the items on both the statements and check register alike you will have a final total of your register.
Step 6 – On the back page of the statement or on another piece of paper write down the ending balance that the bank shows for your account on the last (newest) statement.
Step 7 – Now list any and all deposits and credits that you have in your register but are not on the latest statement and total those.
Step 8- The next step is to do the same thing with all the checks and debit card transactions – list all of those that are not on the statement and total them.
Step 9- Now, take the amount that the bank listed as the ending balance and add the amount of the deposits/credits that were not on the statement that you totaled. Subtotal. Next, subtract the total amount of the checks and debit transactions that were not on the statement and subtract that total from the subtotal.
Step 10 – Hopefully, that total matches the total in your check register and you’re finished. Just make some notation in the register of that balance – I usually place a couple of dashes next to it so I know that is where I balanced last.
Step 11 – If they did not equal each other the first thing to check is the ending balance that you copied from the bank statement and make sure that is correct.
Step 12- Check your addition and subtraction from steps 7 and 8.
Step 13- If still out of balance, double check that all the deposits/credits and the checks/debits that you listed from your register as missing from the statements to make sure that you listed them correctly.
Step 14- If you still don’t balance then start at the beginning of the register and check your addition and subtraction for every entry. (I saved this one since it takes the most time).
Step 15- If you get to this point where you’ve checked everything again, I recommend, since you haven’t balanced it before, to adjust your register total to match the total you got from the step 10. Going forward you’ll know it was in balance then and will have a starting point where you know it was right.
Once you’ve conquered this procedure and you keep it up every month, you’ll find that it takes you less and less time as it becomes easier and you become better at entering all your transactions.
My final tip is something I do now so it’s not so overwhelming. I don’t always have time every day to enter all the transactions I did that day. So, I put them in my Sunday Basket (see more about it here) and then on Sunday’s when I go through my Sunday Basket I enter all the transactions for the week in my register and run the total. That way I don’t take time out of my day every time I use my debit card but it doesn’t get so out of hand that I have a lot of entries to make.