Personal finance is just that… personal. In this day and age no one wants to admit to having trouble in the area of their money. We are responsible right? We know what to do right? No problems here… Well take a look at the housing market right now and see for yourself if we really know what we’re doing. We as American’s have not made good decisions with our money and now many of us are paying the price.
One of the most important things you can do to improve your financial life is Check that Book! Many people come to me because they are dealing with overdraft fees and bounced checks. We’ve all done it, but there is a lot of shame, guilt, remorse, and stress over making this particular mistake. I’m here to tell you that there is absolutely nothing to be ashamed of. Actually, this is the reason that I am doing this business. Making smart decisions with your finances begins with tracking where all your money is going. Miscalculations quickly lead to overdrawn accounts. How do we end this cycle? There are several things you can do to get on the right track if this has happened to you.
1. Start with today’s bank balance for your account. Write it in the checkbook immediately.
2. Write everything down!!! All of your ATM debits, checks, debit card purchases, withdrawals, automatic payments, service charges, dividends, and of course all deposits must be written in the checkbook. Many people forget about the automatic payments or checks that were written several weeks prior. If you authorized it, it will hit your account soon. Review the transactions the bank already took out. Insert any transactions that haven’t yet hit your account in addition to outstanding checks you’ve written.
3. On an ongoing basis it is imperative that you write down all transactions as soon as they occur. If you are utilizing a software tool for your checkbook like Money or Quicken then you must keep all receipts in a convenient place so you can record everything as soon as you can get to your computer.
4. Bring the balance down! If you don’t subtract or add your last transaction and know the balance remaining then a checkbook is worthless. The whole point is for you to know exactly how much money you have currently in your account.
5. Accuracy is key. Never round up or down to make it look like more or less is in your account. All that says is that you don’t want face the truth. This whole process is about facing the truth. Your checkbook balance may be just the reality check you need.
6. Remember that using your debit card can also post as a credit card purchase. If you use your pin number during the transaction it posts to your account immediately. If you sign without using your pin number then it is run as a credit purchase and could take several days to show up. Do not allow this to be a checkbook catastrophe. Just because it doesn’t come through today doesn’t mean it is never coming through. Record it in your checkbook just as if it debited your account immediately.
7. Balance it. Be sure to check each transaction with your bank at the end of each month with your bank statement. I check off each transaction when it comes in. This way I know what is still outstanding. OK my engineering background is about to come out… Remember this equation.
Bank Balance = Confirmed Bank Transactions – Outstanding Transactions
You want to make sure not to forget any checks that are more than a month old. Sometimes it takes people a while to cash checks. At least this way you can give them a reminder call to let them know the check needs to be cashed. Otherwise you might feel that you have more money available than you truly do.
You can face the checkbook giant. Actually, conquering this beast will bring freedom and control. Knowing exactly what you have in your account at any given moment helps you to make sound decisions with you money all the time. Even if there isn’t much in the account at least you know. If there is a lot in the account… at least you know. Ignorance in this area is certainly not bliss and could lead to financial stress and countless fees. Make it a point to begin utilizing your checkbook.
“Be diligent to know the state of your flocks and attend to your herds”