How To Balance A Checkbook In 5 Steps

In the digital age, 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? In a world where paper checks are rarely used, does it even make sense to balance a checkbook?

Although this is a legitimate question, understanding how to balancing a checkbook can be useful even today. By occasionally reconciling your checking account with your bank or credit union statement, you can identify and fix any errors, avoid pesky overdraft fees and save more money.

Why It’s Still Important To Balance Your Checkbook

Learning how to balance your checkbook can help you manage your budget. If you aren't regularly monitoring your income and expenses, you may not notice incorrect or fraudulent charges, which can damage your credit score. If you're not monitoring your cash flow, you could be hit with bank overdraft fees or have to pay interest on your outstanding credit card balance.

Technology Can Help Balance Your Checkbook

While you might think of balancing your checkbook as something that your parents (or grandparents) did with a physical check register, it doesn't have to be like that. Mobile banking and other technology has made keeping track of your finances much easier. You can pay bills, review purchases and look at your statement balance in real time. As you monitor your income and your spending, you can make sure that you are staying within your budget and avoid over drafting your account. Apps like Rocket Money^SM can make this easy. You’ll see all of your linked accounts’ transactions categorized and available in one place so you’re not switching between bank windows just to figure out your overall budget.

5 Steps To Balancing Your Checkbook

Balancing your checkbook might give you visions of poring over the account balance on a physical bank statement. But, you can use your online banking account to view your statement ending balance, withdrawals, direct deposit information as well as any bank fees you were assessed. Here are a few steps to make balancing your checkbook a breeze.

1. Get Familiar With Your Check Register

First, you can look at your check register. While you may no longer have a physical checkbook register, you should have a list of transactions that come with your online bank statement. Compare the list of transactions on your account with the deposits and purchases that you expect.

2. Record Your Beginning Balance

The next step to balancing your checkbook is taking a starting balance. You can look at your checking account statement to find your current balance. If this is the first time that you've balanced your checkbook, you can just use the beginning statement balance. If you reconciled your checkbook last month, you should also check that your beginning balance matches the ending balance you recorded last time.

3. Log Your Checking Account Transactions

The next step is to log your checking account transactions. Ideally, you should be logging each transaction as it happens throughout the month. Here are a few examples of transactions that you'll want to log:

• Debit card purchases
• Checks including the check number
• ATM withdrawals
• Any automatic payments that come out of your account
• Your paycheck, direct deposit or any other income received
• Earned interest on your account balance

4. Compare Your Bank Statement And Your Checkbook

After you have your log of all your transactions that have happened throughout the month, you can reconcile your own records with your monthly bank statement. You may find transactions on your monthly statement that don't appear in your log or have the wrong amount — in many cases you may have just forgotten to include it in your own records, but that can also be a sign of fraud. After you've matched up the list of all credits and debits in your physical or virtual checkbook, your available balance should match the ending balance on your bank statement.

5. Investigate Any Potential Banking Errors   

While reviewing your account statement, you may see some transactions that you don't have as part of your own records. You should double-check the bank's records to make sure they are valid charges. In many cases, they may just be transactions that you forgot to log on the day they happened. However, in some cases, they may be the result of fraud.

If you see any fraudulent charges, or 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, possibly even if they are the result of banking errors.

FAQs: Balancing A Checkbook

Should I balance my checkbook if I don’t write checks?

Yes, it is still a good idea to balance your checkbook even if you don't write checks. You can instead think of it as reconciling your spending. You can look through your statement to spot any fraudulent charges and make sure that you stay within your budget.

What is a check register?

A check register is part of a checkbook where you can detail each check or transaction and keep a running total of your available balance. While check registers were more common when physical checkbooks were more widely used, they can still be useful tools. Keeping track of your deposits and purchases can help you make sure that you are staying within your overall budget.

Is balancing a checkbook still necessary?

Even if you don't have a physical checkbook or even write many checks, balancing your spending can still be a good idea. Reviewing your bank statement each month can help you track your incoming deposits and outgoing purchases. That can help you stay on track to have your expenses fit into your income. Reviewing your bank, credit union or credit card statement regularly can also help you easily spot fraudulent transactions.

The Bottom Line: Balancing A Checkbook Helps You Track Your Money

By logging 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. Not only can it help you save money, reviewing your transactions will help you spot any errors in your bank account that need to be fixed. Balancing your checkbook doesn't necessarily have to be with a physical checkbook as there are now many online tools that can help you track your spending.

Need some help tracking your spending and income? Download the Rocket Money app and get in-depth visibility over your bank accounts, brokerages and other assets, all in one place.