How to Balance a Checkbook

In a time when most of our money moves online, you might think that keeping a balanced checkbook is an old-fashioned concept. But knowing how to balance a checkbook is still important because it can help you stay on top of your finances.

Read on to learn how to balance your checkbook or checking account in a few simple steps.

What does it mean to balance a checkbook?

Balancing a checkbook simply means keeping a detailed record of all the money going into and coming out of your checking account. Think of your checkbook as your financial diary.

Each day, you’ll note credits and debits, allowing you to have a clearer picture of what remains to spend or save. This task is important because the account balance you see when you check your account online or at an ATM isn’t always accurate, especially if you commonly write checks.

Checks can take two business days or longer to clear — meaning that if you pay with a check, the money you spent won’t be removed from your account right away. Tracking these types of payments manually can help you steer clear of overspending and avoid overdraft fees.

Balancing a checkbook vs. balancing a checking account

Balancing a checkbook and balancing a checking account are essentially the same thing. Both refer to the process of confirming that your financial transactions match those on your bank statement.

Balancing a checking account is simply a more inclusive term than “balancing a checkbook” because it accounts for all digital transactions, such as online bill payments. This task, also known as reconciling your account, is more than just tracking check payments.

How to balance a checkbook in 5 steps

Now that you understand what it means to balance a checking account, here are the specific steps you’ll need to follow to do it.

1. Choose a recording method

The first step in balancing your checkbook is deciding how to keep track of your transactions. Both physical and digital options exist, and the best choice depends on your personal preference and how you typically manage your money.

If you frequently write checks and have a physical check register handy, you might prefer to manually record your transactions. This is the classic way to balance a checkbook, where you write down each credit and debit.

However, you can also use technology to help with the process. Some people find it more convenient to balance a checking account with a spreadsheet, creating columns for dates, descriptions and other details.

With a spreadsheet, you can also use built-in formulas to handle calculations and minimize the risk of errors.

Whichever method you choose, you will follow the same steps to balance a checking account. The only difference is whether you’ll be writing the information in a physical register or typing it into a digital one.

2. Record your beginning balance

Once you’ve decided whether to use a physical check register or a digital spreadsheet, the first detail to record is your beginning balance — your account balance at the start of the month before any transactions have occurred.

This is your starting point, and that balance should be listed on the first line of your register.

To find your checking account balance, you can view your most recent bank statement or your online banking account. Keep in mind that your statement only provides your balance as of a specific date, while online banking offers a more up-to-date figure.

This is because your available balance online often accounts for any pending transactions, such as recent debit card purchases that haven’t been processed yet.

3. Log your transactions

Next, track your transactions throughout the month, listing each transaction on a new line in your register or spreadsheet. Account for any checks written, bills paid and interest earnings.

Here are some examples of transactions you’ll want to log:

• Direct deposits and other income sources
• ATM withdrawals and deposits
• Debit card purchases
• Check payments
• Bank fees and ATM fees

Don’t forget about any automatic bill payments you have scheduled because missing a transaction will throw off your balance. Updating your register often is the best way to avoid these types of mistakes, so try to log your transactions in real time whenever you can.

4. Review your bank statement

At the end of the month, review your bank statement and compare it with your transaction records to look for any discrepancies.

Some people receive their statements via mail, though bank statements are typically available online as well. Either way, your bank statement will outline your account activity over a specific period of time, usually one month.

In addition to transactions and applicable fees, the statement will note interest you may have earned, which will be important if you have an interest-bearing checking account.

Comb through your bank statement and compare it with your own list of transactions. Once everything is accounted for, the remaining balance on your check register should match the ending balance on your bank statement.

If it doesn’t, do some digging to find out why. It could be that you forgot to log a transaction, or a check sent by mail hasn’t been processed yet. Pinpoint any discrepancies so you can figure out whether they are simple errors or something more serious.

5. Address any errors

If you find errors on your bank statement, take action. You have two business days to notify your bank or credit union about unauthorized transactions and 60 days to notify your financial institution about unauthorized transfers, according to the Consumer Financial Protection Bureau (CFPB).

You can also report bank fraud to the Federal Trade Commission (FTC), which can’t resolve your issue directly but can use your report to help investigators fight against fraudsters in the future.

Benefits of a balanced checkbook

Even if you don’t often pay by check, you can find balancing your checking account useful. Here are a few key benefits of maintaining a balanced account:

• Avoiding overdrafts: If you rely on your online account balance to judge the amount of money you have to spend, you could risk stretching yourself too thin — especially if you have checks that haven’t cleared. Proactively tracking your transactions can help you avoid overdrafts and associated fees.
• Catching and reporting errors: Not every bank error is related to fraud. For example, a merchant may have charged your debit card twice for the same transaction or charged you the wrong amount. Without maintaining your own records, you might not notice these types of errors.
• Spotting signs of fraud: If you notice charges that you didn’t authorize, act fast to minimize any damage. Keeping a watchful eye on your account activity can make early detection of bank fraud easier.
• Tracking your spending patterns: If you want better insights into your spending habits, tracking your transactions can help. You can also categorize your spending to get a better idea of where your money is going each month, allowing you to budget more effectively.