A Guide to Checking Account Balancing

FT Contributor  | 

The concept of balancing a checkbook is fairly well known. You track your deposits and withdrawals in your check register and use it to calculate how much money you have in your checking account.

But what about balancing the checking account itself? While similar to balancing a checkbook, checking account balancing consists of tracking all cash flow in and out of your checking account — not just via checks — in order to make sure everything is correct and you and your bank are on the same page regarding your financial status.

How to Balance a Checking Account

You may be used to swiping your debit card and making automatic payments without bothering to keep tabs on the balance in your checking account. However, getting into a habit of balancing your checking account on a regular basis can be a big step in maintaining healthy finances.

The process is fairly simple. All you’ll need is:

  • Your latest bank statement: You may have received a paper copy in the mail or an electronic copy online. You may also be able to log into your online bank account and access the information there.
  • Your check register: To balance your checking account, you’ll need to keep a separate accounting of your transactions. This can be on paper, in an app, or via a spreadsheet. It should document every transaction that you’re aware of in the previous period — usually a month.
  • A calculator.
  • A pencil and paper or spreadsheet.

Once you’re set up, follow these steps:

Assess Balance

Start by recording your checking account balance at the end of the month on your paper or spreadsheet under a column titled “account balance.” This will give you a starting point to aim for as you work backward and compare transactions recorded by your bank and yourself in the previous period.

Compare Outstanding Deposits and Payments

Next, compare your check register to your bank account. Look for each check that you’ve written and then confirm if it has shown up in your checking account yet or not. If it has, make a note or place a checkmark next to both items.

If you find that a check that is recorded in your register has not yet appeared on your account, it is likely an outstanding payment — i.e. a check that you already wrote but hasn’t been cashed yet. Add these to your paper or spreadsheet under a column titled “outstanding payments.” When you’re finished, add these up.

In addition, look for any deposits from payroll or other sources of income. Mark each one that appears on both documents and then add any outstanding deposits that are in your check register but haven’t shown up in your bank account yet to a column on your paper or spreadsheet titled “outstanding deposits.” When you’re finished, add these up as well.

Review Transactions

Next, it’s time to comb through your monthly transactions. Compare each item of activity in your checking account statement to your transaction register.

As you go along, checkmark each item that shows up correctly on both. If a transaction appears in your checking account alone, such as an ATM fee, an overdraft fee, or accumulated interest, make sure to add it to your check register — unless you believe it to be a mistake. In that case, make a separate note of the error to check on later.

Once you have all of your transactions and outstanding deposits and payments synced up (sans any flagged errors), use your calculator to do the following:

  • Start with your account balance.
  • Add your outstanding deposits.
  • Subtract your outstanding payments.

The total at this point should match the number in your check register.

Contact Bank With Mistakes

If you complete your analysis and the numbers aren’t equal, this is usually due to a manual error. Go back over your account and check register and look for any discrepancies you may have missed. Also, check your arithmetic and see if you hit an incorrect number on the calculator.

If you do find a transaction that is either a bank error or potentially fraudulent activity, contact your bank immediately to contest the error and discuss further steps.

Why Balance a Checking Account?

While balancing a checking account can be an intensive activity, it’s well worth the effort. A checking account that is properly balanced allows you to:

  • Keep an accurate budget that is tuned to your actual income and expenses and not just projections or estimates.
  • Tailor your budget to save for short- and long-term goals.
  • Avoid bounced checks by ensuring that you have enough money in your account for any outstanding payments.
  • Remain aware of how much money you’ve earned in interest.
  • Prevent bank errors and catch identity theft activity as early as possible.

From mundane monthly financial maintenance to preventing life-altering identity theft, there are plenty of reasons to take the time to balance your checking account on a regular basis.

When to Balance a Checking Account

If you’re wondering how often you should balance your checking account, a general rule of thumb is once per statement period (usually around once a month). This frequency works as long as you aren’t bouncing checks or overdrafting regularly.

However, if you find that you’re running out of money in your account on a regular basis, you may want to consider checking your account balance more often. In fact, in the case of chronic issues, you may even want to check in before every transaction.

The good news is, if you do this for a while, you’ll likely become more familiar with your spending habits. As this takes place, you’ll naturally course-correct, overdraft less often, and eventually be able to back off to balancing your checking account once per period again.


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