Watch Related Videos
comments
Part 2, Your Checkbook Register
In Part 1 of Balancing Act: Keeping Your Checkbook in the Black, we discussed the necessity and advantages of keeping your checkbook and account up-to-date. As stated, with the application of just a small amount of discipline, you can avoid all of the fees associated with overdrafts and “bounced” checks (which can be quite considerable), in addition to keeping your check-writing privileges and credit rating in good standing. In Part 2, we’ll present some practical instruction on just how to balance your checkbook.
The simplicity of these instructions may seem to defy the need for them to actually be written down. But when you consider that banks raked in well over 30 billion dollars in deposit account fees last year (and much of it no doubt due to overdraft fees), it’s easy to conclude that numerous people do not put forth the effort to meticulously look after their accounts. Many could use a refresher course, and some people have never learned how to keep a checkbook balanced.
The first thing that is necessary in keeping your account managed properly is to be aware of all potential fees that could be charged to your account. Banks are required to give you a Fee Disclosure Statement before opening your account. Look over the disclosure carefully. Is your checking account free with no minimum balance requirement, or is there a charge if you fall below a minimum amount on deposit? Are you charged a “foreign” ATM fee if you use an automated teller that your bank does not own? Are you charged for a telephone transaction, or for a balance inquiry? All of these fees, if not known, can throw off the amount of money that you think you have in your account. You must, therefore, be fully aware of the fees that could be incurred.
If you are just beginning to keep a register, you must identify an initial balance. For a new checking account, this is easy: it’s your opening deposit. If the account has been in existence for awhile, it’s a little trickier. You’ll need to keep the account inactive for a few days. Don’t write any checks or make any debit card purchases. This will allow any outstanding checks or debits to post to your account, and give you an up-to-date balance. A bank representative can tell you when an item posts (or is subtracted from or added to your account’s balance). Once you’re sure that all recent purchases that you’ve made have been accounted for according to the bank’s records, use the balance that they give you as your initial balance.
Starting with the top line in your checkbook register, write your initial balance to the far right. Enter the date, along with a description of the entry (“Initial Balance”, for example) on the same line. From here on, it’s simply a matter of keeping a running record of any and all transactions that are made. If you write a check, enter the check number, the date, the payee, and the amount of the check in the register, then subtract that amount from your balance. If you make a debit card purchase, treat it exactly as you would a check (except, of course, there will be no check number). If you make a deposit, enter the date, a description of the deposit (“Pay Day”, for instance), and the deposit amount. Then add this amount to your balance. Make an ATM withdrawal? Enter the date, description, and withdrawal amount, including any ATM fees that you were charged (your receipt will show this). A word of caution: your bank may charge an additional ATM fee (the “foreign” fee mentioned earlier) on top of the ATM fee showing on your receipt. If they do, you must annotate this in your register just as you would any other transaction. This is why you must be aware of any charges that your account may be subject to.
If you don’t make the entries and do the math at the time of the transaction, simply put the transaction receipt in your register and bring it up-to-date at the end of the day. If you do this faithfully, it will only take a matter of minutes every evening to keep your checkbook register current.
In Part 3 of this article series, we’ll discuss how to cross-check, or reconcile, your checking account. It’s crucial to verify your numbers with your bank’s records.
