Balancing a checkbook is an essential basic life skill that everyone needs to know about to master their financials. This is especially true if you want any chance of successfully budgeting, investing, and saving more money for your future.
Have dreams of owning your own business one day?
Every successful business owner needs to know a bit about basic finance to succeed and move their business to the next level. Learning how to properly balance a checking account for your personal life is a great place to start. However, depending on how complex your business is, you’ll most likely still require help from a CPA and Accountant.
The main takeaway I’m giving you in this article is this: In order to have any financial success as a working adult or business owner, you need to understand the basics of balancing your checking account. The earlier you learn this, the more successful you will be with managing your finances.
This applies to young adults who are High School or College Students. As well as adults who want to master their retirement accounts and monthly budgets.
The Exact Meaning Of Balancing a Checkbook
The exact meaning of balancing a checkbook is this: You are keeping a record of all the checks, debits, and credits that hit your account. What you have in your record should also match the statements you get from your bank.
The end goal is to make sure that the account balance you have recorded always matches the amount that the bank reports in your online banking and monthly statements.
Otherwise, you’ll have an increased chance of bouncing a check or overdrawing your checking account balance to a negative balance.
In other words, you’ll run out of money!
You also want to verify the bank is not making a mistake or overcharging for fees. Likewise, you can also make sure that merchants you are buying products and services from are not overcharging you!
To see a more technical term for balancing an account, review this short reference article at Wikipedia (Balance and Accounting).
2 Strategies For Balancing Your Checkbook
There is more than one strategy to use when balancing your checkbook. Depending on where you are today with your finances, I recommend you start with the most basic form which requires you to write it down into a printed worksheet and use a pocket calculator.
As you progress your skills doing it manually, you’ll find that a budgeting app like Quicken or Mint will make things much easier in the long run. This will be discussed in strategy #2 below.
Strategy #1: Balancing a Checkbook With An Online Activity Worksheet
Check out this checkbook balancing worksheet from Chase as an example of how to manually balance your checking account step by step. Every bank has one you can either download or use on the back of your printed statement.
When gathering your transactions to start recording them, you can get them from the actual printed monthly statements or your online banking app.
The most important items to track on the worksheet are various transaction details like the date, reference or check number, a description of the transaction, the exact amount, and the current balance. For each transaction, you’ll add or subtract the exact amount to figure out your new current balance depending on if it was a deposit or purchase that you made.
This is where a basic calculator comes in handy! Your smartphone, computer, or a good old-fashioned pocket calculator.
As you learn the basics, eventually you can get away from a pen and paper and actually just use a Microsoft spreadsheet to input your numbers. A Google Spreadsheet will work just fine too and won’t require you to buy any software. Just match up the columns to your various transaction details in your spreadsheet and you’ll be good to go!
Strategy #2: Personal Finance Software Makes Balancing Your Checking Account Easy In 2021
Once you learn the basic calculations and transaction details of balancing your checking account from the previous strategy, you’ll be ready to use a money management app to feed in your transactions from your online banking account.
The advantage to using an app is that it will do all the calculations for you and allow you to just verify the accuracy of each new transaction that comes in. Then you can set up categories and easily track your spending using a budget with various goals for saving money, etc.
To get started with apps there are two that I highly recommend.
- The first is Mint, it’s an online personal finance and budget app that was acquired by Quicken. It’s a great entry level way to start managing your finances and tying in your checking, savings, and credit accounts all in one place. The downside, you’ll still need to keep tracking your transactions with a separate record like a spreadsheet since it does not have balancing (reconciliation) built into it.
- The second option is the actual Quicken personal finance software. The basic plan starts off around 35 bucks per year for a full personal financing solution. They’ll be a bit of a learning curve but you can start balancing your account with ease by following these reconciliation instructions by Intuit. Then, you can ditch your spreadsheet!
The Bottom Line: If you’re willing to pay for Quicken, I recommend skipping Mint altogether because you’ll still have to use a separate record!
In 2021, balancing a basic checking account is mandatory for anyone working a job or running a small business. I highly recommend using budgeting software like Quicken, which I mentioned previously. The learning curve of getting it all set up will be worth it. Plus, it beats a paper and pencil any day of the week!
If you are looking for a video to show you how to balance your checkbook, I found this one which was very nicely produced by Liberty Bank.