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Balancing your checkbook or checking account means keeping track of all deposits and withdrawals, which allows you to determine your account's balance at any given time. A balanced checkbook can be a valuable budgeting tool, and can also help you avoid overdraft fees.

Balancing your checkbook

It may seem like an antiquated process to physically write down deposits and withdrawals in your checkbook ledger (or even in an electronic form), but doing so can be an extremely useful financial tool.

First, find the register that came with your checkbook, unless you want to keep track of your transactions electronically on a spreadsheet or accounting program. (I realize some of our younger readers might not be too familiar with paper banking products, so your checkbook register looks like picture at the top of this article.)

Next, find out your account's current balance by logging into your account, or checking your balance at an ATM. Write this amount on the first box on the register, with a note that says "balance forward" or "starting balance." Be sure to account for deposits and checks you've written that may not have cleared yet.

After you have your starting balance, write down all of your transactions from that point on. To differentiate, put a minus sign (-) in front of debit amounts and a plus sign (+) in front of withdrawal amounts. Be sure to include all checks you write, cash you withdraw, and online bill payments. If your paycheck is directly deposited, write that in the ledger on the appropriate day. Clearly and specifically label each transaction, so it's easy to identify later on. For example, "Check payment for August 2016 child care: $550" is much easier to identify than "Check: $550."

Calculating your current balance

The basic formula for balancing your checkbook is the starting balance plus any deposits, minus any withdrawals.

If you've done a good job of keeping up with your transactions, all you have to do is enter the starting balance into a calculator, add deposits, and subtract withdrawals. Better yet, here's a checkbook-balancing calculator that can make it even easier.


* Calculator is for estimation purposes only, and is not financial planning or advice. As with any tool, it is only as accurate as the assumptions it makes and the data it has, and should not be relied on as a substitute for a financial advisor or a tax professional.

You don't necessarily need to calculate your balance every day or after every transaction. For example, I like to balance my checkbook before I pay my bills for the month, just to make sure of how much money is in my account.

Why it's important

There are several good reasons to balance your checkbook after every transaction. Just to name a few of the biggest reasons:

  • Balancing your checkbook helps you keep track of your spending habits, and lets you know exactly how much money you have at any given time. This can be useful for budgeting purposes.
  • Knowing how much money is in your account prevents you from spending too much, and from being assessed overdraft fees or bouncing checks.
  • Even in the age of online banking, financial institutions still make mistakes from time to time. Balancing your checkbook and comparing it to your bank's records can help you catch mistakes and fraudulent activity on your account.