Balancing the Impossible Checkbook
Your Checking Account
Will Streamlined Checking Disclosures Catch On?
My Checkbook's Impossible
How do you begin to balance a check book that has been off for so long? It seems so hopeless that I might have to start a new account. I brought it to my credit union and they tried to help, but it is embarrassing having a stranger looking into you personal records. Am I the only one who is experiencing this? I read dollar stretcher and am trying so hard to get a handle on my finances, but looking into my checkbook gives me a feeling of being defeated before I even begin! Any words of wisdom out there?
Stop Right There!
Best recommendation is stop using the checkbook, you do not have to open another account, but all your bills should be paid by postal money order for that month. Postal money orders are reasonably cheap, and the cost will come out less than the cost of opening a new account and having checks printed (usually about 12 or 14 dollars). Once the bank sends a statement with no checks, deposits or other against it, use that figure to start the book fresh and keep it balanced. Learn how to keep this book balanced, this is not a difficult thing once you understand the components involved.
Go to Cash...
The first thing I would do is stop writing checks to make the process simpler .. try to go on a cash system, at least for awhile. Then get your account balance from your credit union. On a sheet of paper, list all of the checks you have written for the past 3 months and double check your past statements to note which ones have cleared. Subtract any outstanding checks and automatic payments (if you have them) from your current account balance. The remaining amount (hopefully in the black), is what you really have in your account. The final (and ongoing) step is to practice discipline by maintaining your check register with the following information: checks written, deposits made, dividends credited, automatic payments and service charges withdrawn to make sure you have enough in your account to cover them.
My credit union offers a cool service called "TellerPhone" in which I can access my account records over the phone and use mostly to see which checks have cleared and verify the amount ... sometimes mistakes are made and not to your benefit! If your credit union has such a thing, I highly recommend using it, especially in the beginning when you're working toward cleaning up your check register.
One thing that I found to be helpful is going to a cash system for things like groceries and incidentals, thereby reducing the number of checks written which in turn eases the bookkeeping! Also, I am on the budget plan for gas and electricity so I know how much those bills will be each month. In addition to being on the budget plan for these utilities, I have the amounts (plus my phone bill) deducted automatically each month from my checking account. There is no charge for this service so I save money by not writing checks and paying postage but most importantly, I am not spending my time on mundane and repetitive paperwork!
I hope that this information might be helpful to you. By taking personal responsibility of your financial situation, you'll know where your money is going (and not going) and have some peace of mind.
Valerie in Ann Arbor, MI
Answer to the question from India about how to balance your checkbook. Get yourself a Quicken program for your computer. Put all the information into it from your checkbook and it pretty much balances it itself. I keep a separate checkbook on paper but also record all this information into the Quicken program. There is also the reconciliation part in the program that is self explanatory.
Start at the Back...
of the Bank Statement
I am an accountant by profession and I would like to respond with some tips for India about balancing a checkbook. The best place to start is the back of your bank statement. Virtually every bank statement has printed instructions on the reverse for how to balance your checkbook. It's really pretty easy IF you keep track of your transactions. Start by recording every check, every ATM withdrawal or deposit, and every debit card purchase in your check register. If you have trouble remembering to do that, spend just a little extra on duplicate checks, the type with a carbonless copy of each check. Stick your ATM and debit card receipts in your wallet and periodically post them to your check register. If your spouse can't or won't participate and balancing your checkbook is important to you, consider separate accounts.
Now, once you written all of your banking transactions for at least one month in your check register, you are ready to begin. Start by matching each transaction on your check register with the transactions on your bank statement. Mark each one as you match it up. At this time, you should record any bank items that you had no opportunity to record earlier, such as interest on your account or the service charge for the month. Now, take the bank's balance and add or subtract any items that have not yet cleared the bank and you should have your bank balance. Write that in your check register. If you keep writing down each transaction, your balance should henceforth agree to the bank after the reconciling items (the deposits and checks that have not yet cleared the bank).
The most important reason for matching your check register to the bank statement that I have found is not balancing my checkbook - it's catching bank errors. Checks are often cleared for several cents over or under the amount written and occasionally checks are posted to my account that were written on another account. Customers frequently have only 30 days from the statement date to bring this type of error to the bank's attention!
All that being said, since I do this type of work for a living I hate to balance my checkbook and never did until I got married!
Let All the Checks Clear
the only thing I would know to do is to let all your checks clear. ALL OF THEM before you try to use your account again. This happened to my boyfriend, and it was like a vicious cycle, bouncing checks and the fees just kept him from being able to get a handle on things. He let all checks, withdraws, deposits clear the bank, and he went in and got a new beginning balance from the bank, and in a sense started over. He even got a new register so he could erase what damage was done in the past. This got him back on track without having to close/open a new account.
Jennifer in Bristol, TN
Just Give Up!
In order to get your checkbook back under control, don't be concerned with balancing every entry since you last balanced: this is a waste of time. Your main concern is having an accurate current balance. To establish this, get a clean check register and follow the following steps:
- Obtain your "balance" from the bank as they show it. Write that amount as the first balance amount in your register.
- Determine which checks have not cleared the bank yet. Most banks allow you to check this over the phone lines. If not, go to your credit union and have them print an up-to-date interim statement and use it and your previous statements. Start with your most recently written check and work backwards. As you find a check which hasn't cleared, enter it in your register. After you've gone back a month or two, you'll get to the point where they're all cleared. Don't be concerned with ATM withdrawals unless you just made one yesterday or today.
- Now that you have written all uncleared transactions in your register, do the math to determine your current balance.
- Get in the habit of keeping a current running balance and balancing monthly. If you need to, update yourself weekly by checking your cleared transactions over the phone if that service is available to you. I check mine fairly regularly and mark cleared checks, so if I need to update my balance I can do it quickly.
It Can Be Done
I am an accountant who has been faced with enough decomposed checking accounts to pretty-much know what to do about this. No, dear, you're not alone.
First, get out your last four or five checking account statements, plus the canceled checks Next, get out your check register, check stubs, or duplicate checks for the period of your statements, and go through checking off all the items. What we are looking for here is the uncleared stuff. If you can get a printout, or activity from your bank's customer service phone number, do that too, and use these ending figures to determine what's cleared and what is not.
Next, get out a piece of paper and write the bank's ending balance on the top. Then add all the deposits that you have listed as occurring since the last bank statement. Now, going through your check registers for the past 4-5 months, look for any items that haven't cleared to date. Verify these as not cleared by carefully looking in the bank statements for these checks. List them on the sheet of paper. The same applies to any debit card usage since the last statement. Total all these items.
Subtract this amount from the figure you got above. This is your checking account balance. If it is negative, you need to get to the bank *quick* and cover up the shortfall. Also, adjust your ending balance in your check register to adjust. This should be pretty reliable because anything over 6 months old is generally considered to be a stale item anyway.
The object here obviously, is to cut to a balance that reflects what is going on with the bank. Sort of an Occam's razor approach, but it deals with your bank relationship.
Last but not least, since you have a computer, I recommend you buy Quicken or one of the other good home/small business programs and maintain your records. One caveat, however: *Don't* completely depend on the software for your checking account balances. I found this out the hard way the day my computer went on the fritz and had to go into the shop. I had no access to my financial records and wasn't maintaining a running check register in my checkbook. I was running fairly close to the edge (I was aggressively paying off credit cards) and the up shot of it was that my overdraft charges from the bank almost equaled my repair bill for my computer when I got it back. Needless to say the first thing I did was get my paper check register set up and running and I have had no further problems since.
Jill P. in Hillsboro, OR
How We Balanced
A Two Year Mess
I once helped a friend balance an account that hadn't been done for over two years - yes, YEARS! She had fees for checks, monthly fees, bounced checks coming out and occasionally interest coming in (it was an interest bearing account if the balance for the month stayed over a certain amount). Luckily she had all her statements and old duplicate check records.
We started out by putting everything in order - statements in one stack, checks in another. Then we went through and verified the clearing of each check. Any old checks that hadn't cleared we verified were voids. Any items over 1 year are dead in any case. Recent checks that hadn't cleared were set aside for the final balancing.
Deposits were also verified against pay stubs, since this was a direct deposit account. Deposits that were not direct/pay deposits were verified as much as possible. (Income tax refunds were easy. The odd $20 ones you pretty well have to take on faith.)
As the checks were verified against the statements (this is NOT balancing each statement, just matching the check number against the statement to see which checks the bank had) they were stored in a check box in CHECK order - not with the statements. Statements were filed in a folder.
Once all the checks and statements were done, we were ready to do a statement balance to get her a balance to start her new register with. (After 2 years, there was no point in doing anything other than taking the bank's word on old statements.) To do the final balance:
- Total all outstanding checks (the ones not found on a statement yet). Subtract this total from the ending balance of the last available statement.
- Total all outstanding deposits. ADD this to the answer from step one.
- Write this starting balance in your brand new, clean register.
Now, the big thing is to keep it from happening again. (My girlfriend never would do it, every couple months she'd have me balance for her.) The best thing is to get a simple checkbook program - Microsoft MONEY is my favorite (and one that comes with many systems). Quicken is a good program with a bit more power; but with the extra power/features comes more commands and a higher learning curve.
USE the program. Your starting balance is the balance on your last statement (used in step one above). Your first entries are all the items (checks and deposits) you used in steps 2 and 3.
Every time you write a check - or at least once each week - enter in the computer. This will be your register and subtraction errors are a thing of the past. (Now you get to deal with typos!)
When your statement comes, you mark the items that have cleared, enter any fees in the computer and click on the "reconcile" button to see if your computer balance matches the bank balance. If it doesn't, double check you have entered everything in the computer properly, and that you have entered everything.
Should Do It
All you need are 3 statements (current, last month and the month before) and 3 different highlighter pens. Start with the oldest statement and using a highlighter mark off each check, deposit, ATM, automatic payment, etc. until the whole statement is colored and corresponding colored entries are in your checkbook. Be sure to write in and color any entries on the statement that aren't on your register. (Don't try to balance it yet!)
Then take last month's statement and another color highlighter and mark off each transaction on both the statement and your check register again. (Still not time to balance it.)
Finally, using the most recent statement and a new color, do the same marking. This time, write all the uncolored checks and other money out as well as the deposits on the back of the statement in the space provided and total each group. Then take the ending balance from the front of the statement, add the total of the deposits (#2 above) and subtract the total of the checks (withdrawals)(#1 above). That is in your balance! BE SURE TO WRITE ON THE NEXT LINE " JUNE STATEMENT BALANCE $____.__," SO THAT YOU WILL KNOW THAT IS YOUR CORRECT BALANCE. (Now, don't make any changes before that line even if the transaction happened then) If you do it every month, it takes only 5-15 minutes!
Cyndi K. (Bookkeeper in Sierra Village, CA)
Let the Bank Help
Don't feel like you are alone. Check books can be one of the most frustrating parts of life. I have been in this situation it's sad to say , several times. First thing you should know, is do not under any circumstances close your account. It makes it hard to open a new account anywhere else. What I did with the help of a very nice teller, was quit using it for a month. Yes a whole month. Make a deposit so you have enough to cover what checks you've written, and keep only what you think you'll need till the next payday. Call every other day to check what your balance is so you don't get any over drafts. At the end of the billing cycle you should get your stamen with the number of the last check you wrote on it. This is the scary part, it that check number is there you have to assume that all checks written before it have also cleared your account. If it's not there then you'll have to wait till your next statement comes using only cash again. This takes a long time but it is the only way to do it with out messing things up more. After you have all your checks through, your statement will tell you what your balance is, get a new ledger for you check book and use this as your balance. Balance your check book every payday. Don't let it go any longer. If you get paid BI-monthly do it every Friday. Try and keep your check writing to a minimal till you get used to the new system. I find that if I go longer than a week , I start making mistakes. One other very helpful thing is to get carbon copy checks, they are a bit more costly but they can save you a lot in the long run. I write about a box of checks a month and very rarely carry cash, so I know how easy it is to mess things up.
Would you like to
pay off your credit cards
in less time
for less money?
Three Steps to A New Balance
Get all statements and checks together.
The 3 Steps to Balancing
Step 1: Locate the ending balance on your last statement and write it down.
Step 2: List all deposits that you have made recently, that are not included in this statement and total them. Add the total of these deposits to the ending balance from your statement.
Step 3: Combine checks from all statements and put in numerical order, if it seems overwhelming, divide by smaller groups then combine together. Once having done this take the most recent statement and list the checks that you have written, but have not yet received back. Remember to account for all ATM and/or Debit transactions. If they have not yet been taken out, list ATM's as a check not cleared. Add together checks and ATM's not included in statement.
Add the total of step 1 and 2 together and minus the total of step 3. This should be your resulting balance. Remember to make sure all deposits are accounted for and were deposited correctly and that all checks have cleared for the correct amount (the amount listed in the lower right hand corner of the check should match the amount you wrote the check for).
Most banks have a number you can call to get your bank balance and see what checks have cleared. You may want to do this once or twice a week at first to make yourself feel confident with this balance once your back on track.
Remember, .this is just a most recent balance to help ease your mind and give you a start. If you find an error take it to your bank immediately. I work in a bank and we can make errors and want to get them resolved quickly.
Tip: To make balancing your statement easier find out when your statement closes each month and try writing as few checks as possible as it approaches, so most of the checks will be included on the statement.
Lori P. in Redlands, CA
Take the Next Step
- Are you getting the best CD rate? Use our simple CD tool to find out. It's completely private, easy to use and you'll know what rate is available to you in seconds!
- Get the interest you deserve! Compare money market rates with our best rate finder. It only takes a minute and your privacy is completely protected.
- We are always finding new ways to help you with your finances. Visit our money section each week to keep your finances on track.
- Do you struggle to get ahead financially? Then you'll want to subscribe to our free weekly Surviving Tough Times newsletter aimed at helping you 'live better...for less'. Each issue features great ways to help you stretch your dollars and make the most of your resources. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist And What You Can Do About It for FREE!
Debt from my past is preventing me from saving for my future! Tell us: Yes, debt is hindering my ability to save and I could use help dealing with it! or No, debt is not a problem but I am trying to get ahead financially!
More Money Tips & Tools
- 5 low-risk ways to earn higher interest now
- 10 easy ways to save money for the holidays
- 7 IRA withdrawals that don't trigger a penalty
- 4 secrets to maximize your credit card rewards
- Mutual funds for the little guy
- Turning your hobby into extra income
- Positioning yourself for career advancement
- This week's Readers' Tips