If you are trying to change your financial picture, it is essential to track your expenses each month. It is just as important to balance your checking account and credit cards to the bank statement each month. While it may be an extra step, it allows you to spot problems with your account and it can prevent you from overdrawing.
Whether you are tracking your accounts with pen and paper or using financial software, this is a step you shouldn't neglect. Here are seven reasons you need to take the time to balance your checking account to your statement each month.
Catch Mistakes You Made
One of the biggest reasons you should balance your checking account to your statement is to catch any mistakes with your record keeping. It may seem obvious if you are keeping track manually, but even if you are using software, you may make mistakes in entering your deposits or transactions (or the software may make mistakes in auto-importing them). These may be minor differences, but transposing two numbers will throw your balance off. Balancing to your bank statement will help catch those and prevent you from accidentally overdrawing.
Track Your Spending
When you balance your checking account, you can also track your expenses. It is very easy to do this with personal finance software that provides a running total. When you enter the transaction into your app, it will automatically track your spending so that you know when to stop. The software helps you plan for the annual expenses because you can look back over your spending for the year and see things you may have forgotten to include in your budget.
Notice Mistakes Your Bank Has Made
Banks have been known to make mistakes. However, if you are not balancing to your account, you may not realize that a deposit is missing or a withdrawal is unauthorized. There is a paper trail that the banks use, and you should be able to work with your bank to correct any errors—but only if you catch them.
Catch Fraudulent Changes
Identify theft is becoming more and more common. Your debit card information may have been stolen. The thieves then use the card information to make purchases online. Sometimes these are large transactions, but sometimes they do several smaller transactions to try to sneak by unnoticed.
Banks and credit card companies have a period of time in which you can report fraudulent charges, usually between 30 and 90 days from the date of the statement. If you don't balance your statement, you may not catch these until it's too late. You might also notice things like a transaction that was accidentally run twice at a store.
Be Aware of Where You Are Financially
If money is tight and you are living from paycheck to paycheck, then you need to carefully track your spending to make sure you do not accidentally overdraw your account. This can easily happen if you are married and you are both accessing your checking account. It is important to balance your account so that you know where you are and how much money you have left to spend until your next paycheck.
Discover Missed Automatic Payments
You may have an automatic payment set up to pay club dues, medical bills, insurance, or other small monthly payments. These payments should go through without a hitch, but sometimes if the company has switched over to a new system or you get a new credit card number, the payments may not be processed. In some cases, it may not be a big deal, but if it ends up with your insurance being canceled or you get hit with late fees, it could cost you more than you expect. When you balance your statement each month, it allows you to catch these mistakes and contact the company before there are any consequences.
Stop Small Things From Becoming Big Things
When you balance your account, you may catch small fees or mistakes that do not seem like a lot on the surface. You may remember to record the ATM withdrawal, but not the additional fee that your bank charges for using a different bank’s ATM. These fees may be small, but if you do not account for them in your balance, you may end up overdrawing your account and incurring even more fees.