How To Start Balancing A Bank Account

It happens to the best of us. You check your bank account balance, see that you have enough money to make a purchase – only to find out later that you had forgotten to include a payment that hadn’t yet been posted.

Luckily, you can start balancing your bank account at any time. It’s easy to track your checking account!

Step 1: Set up your spreadsheet

If you don’t have Excel, iCal, Open Office, or Microsoft Works installed on a personal computer, you can sign up for Google Documents. Or just use a sheet of paper, if you prefer! Use whatever system you’re most comfortable with.

Keep the spreadsheet private, but don’t worry about it too much. It will not include any of your personal or bank account information.

Set up columns for Date, Check #, Description, Debit, Credit, Cleared, and Total.

Date: The date you made the transaction (bought the groceries, mailed the check, etc.)

Check #: Self-explanatory. It’s helpful to have this as a separate column so that you can easily skim the spreadsheet to see which checks have cleared.

Description: Put the name of the business here. If you have a problem later, you’re going to want to be able to search by “Chevron” or “Texaco” versus a description that says “gas.”

Debit: This is the column for amounts that you paid to other people (groceries, gas, etc.).

Credit: This is the column for payments that you received from other people (like your paycheck).

Cleared: This is a column you will check when you are actually balancing your account.

Total: How much money you really have!

Step 2: Get your account balance

You can get your bank account balance from your bank’s website, by calling your bank’s toll free number, or by checking your balance at an ATM.

This number is your starting point. Put it in the first line of your spreadsheet with a description of “Opening balance.”

Some bank websites will list two numbers, “account balance” and “available balance.” If this is the case, choose “available balance.”

Step 3: Is anything missing?

Look over your account register on the bank’s website. Or if you’re calling their system, click to have it tell you the most recent account activity.

What you’re looking for is any payments which have NOT been posted to your account. Like checks you have written, but which have not yet been cashed.

If you know of any transactions which your bank has NOT posted to your account, put them in your spreadsheet now.

Step 4: Start tracking!

From this point forward, whenever you take money out of your account or put it back in, note it in your spreadsheet. You will want to balance your spreadsheet frequently at first, until you are sure that you and your bank are in sync.

Step 5: Balancing your account

The actual process of “balancing your bank account” is just a matter of ticking off things on your spreadsheet which your bank already knows about, and making sure the numbers match.

In the example account let’s say I log into my bank’s website and find that they have posted the payments to Kroger and Texaco, as well as my paycheck. However, they have NOT posted check #589, which is the cable bill I mailed a few days ago.

I’m going to put check marks beside all the items that have posted to my bank account. Next, I’m going to add up everything which has NOT been checked (i.e. cleared). Then I’m going to deduct that from the total that my bank is showing for my account:

The bank says I have: $1248.10

But it hasn’t posted my payment of: $78.62

1248.10 – 78.62 = 1169.48

Hooray! That final amount is the same amount that I have as the total on my spreadsheet!

If you get to this step and you still have different totals for your bank account versus your spreadsheet, it simply means you have missed something. Maybe you accidentally threw out the receipt from the coffee shop instead of taking it home and entering it into your spreadsheet. Or maybe you accidentally entered something into your spreadsheet twice.

When your two totals get out of sync, just go back and compare your spreadsheet with your bank account transactions line by line. You will usually find the answer pretty quickly. It can be tedious, but persevere! It’s worth it.

Why Should I Balance My Bank Account?

Keeping a running tally of your own bank account balance (often in a check register) was critical in the last century. Before the days of online payments and instant debit card transactions, it was common for payments to take several days to post to your bank account. And in the days before you could check your account balance online, you had to wait an entire month before you could match your own math to your bank’s!

These days it is still important to track your own bank account balance. You never know when a payment may be delayed. This often happens at small businesses like bars, restaurants, and hobby stores. These small businesses often save money and time by batching all their transactions and submitting them to the card companies once a week.

Furthermore, if you balance your bank account regularly, you will be able to easily catch any suspicious transactions. Anything from invalid or fraudulent charges, to bank fees you may otherwise not have noticed.

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