Internet banking makes it seem like old-fashioned checkbook balancing is a dated skill, like brushing your teeth with baking soda or churning your own butter. It seems even more unnecessary, if you never actually write any checks and don’t have a checkbook or checkbook register. Checkbook balancing, to some degree, is still every much necessary for everyone who has a checking account. You need to make sure that the bank's record of your spending and your resulting checking account balance matches what you've really spent. What better what do to that than by keeping track yourself.

Spending Scenario

Here’s a scenario that happens often. You have a certain amount of money in your checking account, say $1,000. You make a few debit card purchases, like $250. You write a few checks (or do it through online bill pay), that will take a few days to process and clear your account. Say you’ve written $300 in checks.

The debit card transactions will hit your account in a day or two and if you check your bank balance, it will how that you have $750 available for spending. So you go out and swipe your card for $500 of purchases. You’re down to $250 in your account. But remember the $300 in checks you wrote? Those are going to start hitting your account soon and since you don’t have enough to cover some, or all of them, will overdraft, leading to fees.

Sometimes people hold checks for several weeks. You may completely forget about the check, spending as if it'd never been written and are blindsided when the payee finally cashes it. Balancing your checkbook lets you catch these types of situations early, before they impact your money.

Why You Should Balance Your Checkbook

When your bank gives you the latest balance, it can only take into account the transactions it sees – typically debit card purchases and checks that have been presented for payment but haven’t cleared. What you’re really able to spend might be less than that if there are checks floating out there. That’s why checkbook balancing is still important.

Balancing your checkbook has two goals. First, is to make sure your spending decisions are based on the most accurate balance. Relying on your online bank balance can lead to overdrafts. The second reason is to keep track of which transactions have cleared and which have not. Life is too complicated to track your transactions mentally. Writing them down makes it much easier and frees your mind to worry about important things.

How Checkbook Balancing Works

New checkbooks come with a register, basically a booklet with a table where you can track your transactions. At the top of the register, write your beginning balance, preferably a balance that has no pending transactions. As you make transactions – debit card purchases, ATM withdrawals, deposits, checks – will write the transaction and the amount, then add or subtract the amount of the transaction from your balance. (Add deposits and subtract purchases, etc.) Do this each time you make a purchase. Or, write down the transactions you make in a day (or save every receipt) and balance your checkbook at the end of the day.

When you balance your checkbook, verify the transactions against your online banking history. You can check, highlight, or cross out transactions that have already cleared. Don't be surprised if your records and the bank records don't match up precisely. Remember, the bank doesn't immediately "see" all your transactions.

You don’t necessarily have to use the checkbook register, especially if you seldom write checks. You can use a spreadsheet, personal finance software, or a Smartphone app, whichever works best for you. The key is to do it often enough that you’re capturing your transactions and that you choose a method you’ll stick with.

By balancing your checkbook and reviewing your transactions regularly, you can better spot unwise or excessive purchases. You'll have more control over your money because you're paying more attention to it.