Let’s be honest, balancing your checking account—aka balancing your checkbook—probably isn’t on your list of fun activities. But keeping up with your spending and income is a must, and that’s exactly what balancing your checkbook does! So, let’s break down the what, why and how.
What Does It Mean to Balance Your Checking Account?
Balancing your checking account or checkbook, also called reconciling your account, is when you make sure the records you’ve kept for all your spending and income match what the bank says on your physical or online statement.
Why Should You Balance Your Checkbook?
Balancing your checkbook is a way to keep up with your transactions. And if you aren’t tracking all your spending and income, you’re risking of dangerous overdraft fees.
You can also catch any mistakes early when you stay on top of your account, like the if the bank made an error or a business charged you the wrong amount. Or you might catch where you made an error writing down a payment or deposit. (It happens. We’re human.)
And—here’s a big one—balancing your checkbook is a way to catch identity theft because you’ll see any odd charges as you’re balancing.
How to Balance Your Checkbook in 5 Steps
Listen, this process isn’t glamorous, but neither is cleaning your bathroom. And, hey, at least balancing your checkbook isn’t a disgusting chore. Here’s how you do it in five basic steps:
Step 1: Write Down Your Transactions Often
If money comes in or out of your checking account, write it down in the check register or make a spreadsheet. (Check out the register example above.) Do this with any payment: writing a check, using your debit card, sending money with a mobile payment service—you get the idea. Also do this with any money coming in, like your regular paychecks or any side hustle income.
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Some people write down transactions the second they happen. Others collect receipts to log them in later. Just make sure you don’t let days go by before you get in your account. Why? Keeping an up-to-date balance is one of the ways you keep your money from getting away from you.
Step 2: Open Your Checking Account Statement
Next, you need to open your checking account statement—either the paper copy in the mail, the emailed version, or the online view when you log in to your bank.
Step 3: Check All Transactions
Make sure every transaction on the statement is also in your register (or spreadsheet), even pending payments.
Step 4: Update Your Balance
If you realized in Step 3 that you missed some transactions, you need to add them in now. Then you’ve got to do some math to make sure your balance is up to date!
Step 5: Repeat
Some people wait until the monthly statement comes from the bank to balance their checkbook. But if you’ll log in to your bank at least once a week, you’ll give yourself way less chance of letting any transactions slip past you (which helps you avoid those overdraft fees we mentioned earlier!).
Beyond Balancing Your Checking Account
Okay, here’s the deal: Balancing your checkbook is great—but it’s not enough if you want to really take control of your money. Why? When you balance your checking account, you’re just keeping track of what already happened to your money. You aren’t actually planning what should happen with your money. You’re making sure you don’t overspend, which is good—but you’ll never get ahead if you don’t plan ahead.
You need a budget.
Listen, budgeting gets a bad rap—but it’s just a plan for your money. It’s giving every single dollar a purpose and a job. It’s creating habits for your spending so you’re intentional with your income. Every. Single. Month.
And budgeting doesn’t have to be hard. In fact, with the premium version of EveryDollar, included in Ramsey+, it’s easy. You connect your budget to your bank so all your transactions stream right in. Then, just drag and drop them to the right line and watch the math happen for you. (Yes, really.)
Stop simply keeping up with your money. Start making it work for you.
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