Your Guide to Managing a Checking Account in a Paperless World

For most of us, the old school way of balancing a checkbook doesn’t work anymore. The modern banking world brings so many more ways to move money in and out of your account—Venmo, PayPal, bank transfers and automated payments, just to name a few.

 

But just because we don’t use actual paper checks anymore doesn’t mean we shouldn’t balance our account.

 

Is balancing a checkbook necessary?

Back in the day, the practice of balancing your checkbook came out of necessity because there was a significant time lag between when a check was written and when it cleared your bank account. The written record allowed you to know your actual balance as long as you didn’t forget to write anything down.

 

The idea of balancing an actual checkbook is dated—but balancing (or reconciling) your checking or transaction account regularly is still an essential part of managing a budget. Here’s why:

• Balancing your account regularly makes you more aware of where your money is going. It’s easy to swipe your card or make an online purchase without paying attention to how quickly it adds up. Before you know it, your balance is a lot less than you realized!
   

• Reviewing your transactions makes it easy to spot problems like missed automatic payments or transfers, unexpected fees, fraudulent activity and even your own math mistakes. Keeping your own record allows you to quickly spot an error and confirm with your credit union or bank.
   

• Same goes for merchant errors. If you’re rarely going to the trouble of reconciling your account, charges for the wrong amount or items you didn’t purchase can more easily slip through the cracks.
   

• Keeping a record of your transactions can be invaluable if you are assessing your financial goals. Reviewing your spending helps you update budget categories or figure out where you can save money.

 

How often should you balance your checking account?

That depends on what works for you. Ideally, you would log in to your financial institution online or through the app every day or every few days. Doing it this often lessens the transactions you need to remember or keep receipts for. Some people have a routine to check in during the morning when they get on their phone, sit down to breakfast or arrive at work.

 

Once per week is probably the most common time frame—the transactions will surely still be fresh in your mind without having to log in and check every day.

 

At minimum, try to review your account transactions once per month. It will take longer to go through and you’ll probably have to create a system to save your receipts, but you’ll still be within a 30-day window if you need to dispute any merchant or bank charges.

 

What are your options for balancing your checking account?

There are basically two methods to track your banking transactions and balance your account. One is with a spreadsheet—handwritten or digital. And the other is to use an app.

 

If you like the spreadsheet method, decide whether you want to use pen and paper or your computer. Either way, there are many check management templates to download or print—or just create your own. In addition to eliminating the need for paper, the digital spreadsheet is a great option because it’s totally customizable and can be stored in Google Sheets.

 

If you prefer using an app, there are many money management systems to choose from. Start by checking with your preferred financial institution—many offer budgeting systems within their own app or online banking site. If your credit union or bank doesn’t offer this perk or you don’t like the way it works, check out popular apps like Mint, You Need a Budget, Goodbudget and Personal Capital.

 

These apps are all a little different, providing everything from a simplified budgeting snapshot to a more robust budgeting and credit monitoring tool. Some use zero-based budgeting and some use shared envelope budgeting. Research the apps you’re interested in to find the one that’s right for you.

 

Don’t be afraid to change apps if it’s not working for you. It’s important to find the right fit so you’re more likely to stick with a system and reap the financial benefits. It’s also important to make sure you’re using the right checking account. There are a lot of different account options out there—choose something that works the way you like to work or gives you perks you’ll actually use.

 

How do you balance your checking account?

This chore used to involve waiting for the monthly bank statement to arrive by mail and then sitting down to compare it to the check register, hoping you came up with the same balance. Now, the intent is the same, but the process is a little different. Here is a list of the steps to balance your account:

1. Start with your current available balance. Record this number at the top of your spreadsheet.
    

2. Record your pending transactions. These are debits and credits that you know you have made but they haven’t cleared your account yet. Include the date and a brief description. If it’s a check, record the check number as well. Example: 7/7/2021  |   Nan’s Market   |   Groceries   |   $42.39
    

3. Do the math. For each debit, subtract the amount from the available balance and record the new balance. For the credits (deposits), add that amount to the balance. Continue like this until you’ve recorded all transactions.
    

4. Don’t forget! Be sure to include fees paid, interest earned and transactions from other sources tied to your account like Venmo and PayPal.
    

5. Compare. Log in to your account and compare the balance with your own records.

 

What do you do if your records don’t match with your financial institution’s?

If you’re out of balance, you’ll have to compare the activity, line by line, to see where the discrepancy is. Maybe you forgot a transaction, transposed some numbers. Go back to the last time your account was balanced and start from there.

 

How to de-stress your checking account

After you’ve figured out how to best track your spending, there are two more steps to maximizing your checking account:

1. Automate it! Set up automated transfers wherever you can. Consider opening another checking account at the same financial institution. Name it “Bills” or “Household” or whatever works for you. Add up all your recurring bills and set up an automated transfer in that amount to this account. Then you know your bills are covered. You can even add in a little cushion—you know, just in case you needed to use the A/C a little more than usual.

    

   If you’re good about reviewing your checking account often, set up automated payments. That’s just one more step you won’t have to remember to do and can help you avoid on late fees.
    

2. Set up notifications and alerts. Most financial institution apps and money-management apps have the option of setting up notifications and alerts. There are several different options—low balance, any purchase over a set amount and loan payment reminders, just to name a few. These alerts help you stay in touch with your account when you’re not actually looking at it. 

    

   Imagine getting a notification for a purchase you didn’t make. Without the notification, you may not become aware of the fraud until you log in three weeks later—think of the damage that could be done!

 

So, the next time you think there’s no use in balancing your checking account (or digital checkbook!), remember these tips. They can help you avoid paying fees and protect your money.