person holding glasses balancing checkbook with calculator

How To Balance A Checkbook

Jerry Brown4-Minute Read
March 23, 2022

In the digital age we live in, knowing how to balance a checkbook can seem like a skill we no longer need. Why waste time manually reviewing our transactions when we can use fintech tools to automate the process?

Although this may seem like a legitimate question, it doesn’t change the fact that learning how to balance your checkbook is still important. By occasionally reconciling your checking account, you can identify and fix any errors, avoid pesky overdraft fees and save more money.

Balance Your Checkbook in 4 Steps

What does balancing a checkbook entail? When you balance your checkbook, you make sure that the withdrawals and deposits you record match the ending balance on your bank statement. It’s important to know how much money you actually have in your account to avoid spending money you don’t have.

List Your Transactions

To record withdrawals, deposits and other transactions, you can use the checkbook register inside of your checkbook. The checkbook register typically includes these fields:

  • Date
  • Check number
  • Person or institution check is issued to
  • Purpose of check
  • Amount of check
  • Date of deposit
  • Deposit Amount
  • Balance

If you don’t have a paper checkbook, you can use an online checkbook register. When you withdraw money, the balance decreases. Depositing money increases the balance.

The first step you should take to balance your checkbook is to list all of your transactions. Here are some common transactions associated with checking accounts:

  • Writing a check
  • Purchasing an item with a debit card
  • Receiving a direct deposit
  • ATM Withdrawals
  • Transferring money from your savings to your checking account

Writing a check, purchasing an item with a debit card and making ATM withdrawals are transactions that decrease your balance. Depending on who you bank with, these transactions may not show up instantly in your bank account. Checks you write won’t show up until the person you write it for deposits it and it clears.

That’s why it’s important to write these transactions down as soon as they happen. By doing this, you’ll avoid a situation where you forget that you wrote a check that hasn’t been cashed. And this will decrease your chances of overdrafting your account, which will allow you to avoid a $35 overdraft fee.

By contrast, receiving a direct deposit and transferring money from your savings to your checking is a deposit. Record these transactions as they occur to ensure your checkbook is balanced.

Record Earned Interest

If you have a checking account that earns interest, you’ll have to add this transaction to your checkbook register. The amount of interest you earn usually shows up when you view your list of banking transactions online, as well as your monthly bank statement.

Be sure to record this amount once a month, even if you earn very little interest. If you forget to record it, your checkbook won’t be perfectly balanced.

Verify Your Bank Statements

After recording your transactions, your next step is to confirm that the balance you have written in your check register matches your ending balance on your bank statement. To do this, take a look at the balance on your check register and compare it with the ending balance on your statement.

If it doesn’t match up, take a look at each transaction you made via your bank statement and compare it with your recorded entries. For the entries that match up, place a check mark next to them in your register.

Next, look for transactions that weren’t recorded on your checking registry. Did you forget to record an ATM withdrawal? Were you charged an ATM fee for using an out-of-network ATM? Or maybe you forgot to include a big deposit? To balance your checkbook, simply add or subtract the deposit or withdrawal on your checkbook register.

Since your bank statements are only issued once a month, you’ll have to repeat the process at least once a month to reconcile your ending balance and the balance listed on your registry

Fix Any Errors

While reviewing your transactions, if you see any fraudulent transactions - transactions you didn’t authorize, contact your bank immediately. According to the FDIC, you have 60 days to dispute unauthorized transfers. Afterwards, you’ll be held liable for those unauthorized transactions.

This underscores the importance of reviewing your transactions at least once a month. When you’re ready to finance a home or take out a loan, it’s important that the mortgage lender can review the correct bank statement.

Why It’s Important To Have A Balanced Checkbook

Balancing your checkbook is important for individuals, businesses and families.

For Individuals

Learning how to balance your checkbook can help you manage your budget. For example, let’s say you’re a first-year college student who has never had to manage your finances before. During the semester, you overdraft your checking because you haven’t been tracking your spending.

But, then you learn how to keep track of your expenses. Because of this knowledge, you’re more likely to think twice about a purchase before making it. Doing so will enable you to save money while you’re at college. It’ll also prepare you to repay your student loans, if you have any.

For Businesses

Knowing how to balance a checkbook is also useful when running a business. By keeping track of your transactions monthly, you can see whether your business is generating a profit.

Also, if you’re self-employed, this helps when you’re ready to purchase a mortgage. As a self-employed person, you’ll need the following:

  • 2 years of taxes showing your company's net income
  • Banking statements
  • Profit and Loss statement for your business

For Families

Finally, families should learn how to balance their checkbooks together. By doing so, they can identify areas in their budget where they need to cut back to achieve their shared goals.

This can help them achieve their goals, like being debt free, owning a home or saving for emergencies.

The Bottom Line

By writing down your transactions, you can get a clear picture of where your money is going each month. If you don’t like where your money is going, you can adjust your budget accordingly and spend less money.

Not only will it help you save money, reviewing your transactions will help you spot any errors in your bank account that need to be fixed.

Would you like to learn more about how to master your finances and build wealth? Read additional articles on how to manage your personal finances.

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Jerry Brown

Jerry Brown is a personal finance writer based in Baton Rouge, La. He's been writing about personal finance for three years. Financial products he enjoys covering include credit cards, personal loans, and mortgages. Jerry was nominated for a Plutus award for best social media for personal finance in 2020.