Learn the essential skill of balancing a checkbook, or checkbook register, to reconcile and take control of your personal finances. A step-by-step guide for aligning your financial records with your bank’s, helping you avoid errors, dodge fees, and detect fraud. This video teaches you the step-by-step process.
How to Balance a Checkbook
Here, we’re talking about a fundamental skill everyone should have: How to balance a checkbook. Now, you might be thinking, “Who even uses checks anymore?” or “I do everything digitally, so why does this matter?” But listen up, because it’s not just about checks; it’s about mastering your money and knowing where every single dollar is going.
First off, let’s start with the basics. What is a checkbook, and why should you even bother balancing it? A checkbook is simply a record of your financial transactions. This includes checks you’ve written, debit card transactions, automatic bill payments, deposits, and withdrawals. Balancing your checkbook means ensuring that your records match the bank’s records, and this, is your first step to taking control of your finances.
Now, why is this important? Errors can happen. You might forget you made a transaction, or the bank might make an error—yes, banks can mess up too. If you’re not keeping track, you could end up with overdraft fees, or worse, you could be a victim of fraud and not even know it.
Alright, so let’s break this down step-by-step.
Step 1: Gather Your Materials
You’ll need your checkbook register, or if you’re doing this digitally, open up your budgeting app or spreadsheet. Also, get a hold of your most recent bank statement. If you have multiple accounts, make sure you’re looking at the right one.
For this example, we’ll work with a simplified version of a checkbook register. Your actual checkbook or digital app may have more columns or categories.
**Sample Checkbook Register Before Balancing**
Step 2: Start with the Bank’s Ending Balance
Look at your most recent bank statement and find the ending balance. Write this number down; you’ll need it as your starting point.
Your bank statement ending balance is $2,000. Write this down.
Step 3: Add Deposits and Income
Your bank might not yet know about some checks you’ve deposited or income that’s come in, especially if you’ve made some transactions near the end of the statement period. Add those to your ending balance. Make sure you’re not counting anything twice!
Add any deposits that haven’t cleared yet. In this case, it’s the $500 freelance income.
New balance: $2,000 (Bank ending balance) + $500 (Freelance Income) = $2,500
Step 4: Subtract Payments and Withdrawals
Now it’s time to subtract any checks you’ve written, online payments, automatic bill pays, or any other withdrawals that might not yet have cleared the bank. Make sure you’re also accounting for any fees.
Now subtract payments and withdrawals that haven’t cleared. These are your rent for $800 and your phone bill for $50.
New balance: $2,500 (Previous Balance) – $800 (Rent) – $50 (Phone Bill) = $1,650
Step 5: Compare Your Numbers
By now, you should have a new balance based on your calculations. Compare this to the current balance in your checkbook or budgeting app. The two should match. If they don’t, you’ve got some homework to do.
At this point, update your checkbook register with the new balance and see if it matches your own records.
**Sample Checkbook Register After Balancing**
Now your checkbook register says $1,650, and your calculated balance is also $1,650. They match, which is what we want.
Step 6: Reconcile and Troubleshoot
Go through each transaction, line by line, and make sure everything lines up. If you find an error, correct it. If everything matches, congratulations! Your checkbook is balanced. If not, go back through the steps and try to find where things went off track. Check for transposed numbers, forgotten transactions, or potential bank errors.
If there was a discrepancy, you’d go line-by-line comparing your checkbook register to your bank statement to find where the error occurred. Correct any errors to make sure your balances align.
Step 7: Make It a Habit
Don’t just do this once and forget about it. Make it a habit to balance your checkbook at least once a month, or even more often if you’re really active with your account. The more regularly you do it, the easier it’ll be.
So there you have it, the steps to balancing a checkbook. This is a foundational skill for taking control of your finances. If you can master this, you’re well on your way to being the boss of your own money. Remember, every dollar has a job, and it’s your job to know what that is.
Lesson Resource
- How to Balance a Checkbook Lesson – Teaching lesson plan for this lesson.
