In God We Trust

Teaching You How to Get OUT of Debt and Live Debt-Free

Archive for October, 2008

Oct
27

Your Bank Account just bubbles right along, deposits and withdrawals taking care of themselves. You check the balance online now and then, but other than that – what you don’t know is vital!

Your Bank Checking Account doesn’t take care of itself. You need to be in charge and in control. you do that by Reconciling your account – every month.

Here are 5 Reasons you need to do this:

1. You Make Mistakes.

Well, maybe you don’t, but I know I do. If I don’t Reconcile my account now and then, I never discover those errors without pain.

I remember one time as I was paying my bills, I ended up with a couple hundred dollars I did not expect to have. I re-checked my figures, they were right, so I wrote a few more checks for bills that I had been avoiding. Problem was… I forgot to enter my Mortgage Payment! You know what happened next – Bounced Checks, Service Fees, a Big Mess.

Reconcile so you can catch your mistakes and make corrections.

2. The Bank Makes Mistakes.

Yeah they do. Not very often, that’s for sure, but every now and then… And if they do, you can catch them and get it fixed – up to a point. Generally, if you fail to find and correct an error in your account, after a period of time, say 90-days, the error is counted as good. (Unless the error favors THEM, of course…)

So, check them out to avoid their errors costing you money.

3. You Can Avoid Service Fees.

If your account balance is unknown, you can accidentally (you would never Deliberately run your balance negative…) fall below your account minimums and incur fees you didn’t intend.

4. You Can’t Control What You Don’t Know.

How do you keep your budget in line if you don’t know ExActly what your bank balance is? The key concept in money management is to know status at all times. What you spend is the most important variable in the equation of keeping more of your money yours.

Your bank balance is a living, breathing amount, changing by the hour. The Reconciliation is a snapshot of your recent activity. Taking and knowing this snapshot is your vital control measure.

5. Account Activities Get Out of Sync.

Every transaction jiggles your balance. You know most of what YOU do to the account. But, because of timing, your Bank might not know just yet about that credit card payment you made. you might not be aware that your Actual balance dipped negative and the bank is assessing you multiple NSF fees. Just checking your online balance at the ATM is just not enough.

How to Reconcile

Reconciliation takes your balance, and adds deposits your bank knows about but you didn’t, and subtracts charges they know about but you didn’t. That gives you a stable and timely balance you can work with.

Then, you take the Bank balance and add deposits you know about but that have not yet cleared the bank and subtract checks, charges, and withdrawals you know about but have not yet hit the bank. This is another stable balance.

The account is Reconciled if both the balances match.

If they don’t match, then you can begin to track down the culprits. That’s a topic for another post.

The Secret to Reconciliation

The secret to a flawless Reconciliation is implied in adjusting the bank balance step. I mentioned deposits and charges that “You Know About”. You need to keep good track of those deposits and charges. It is easiest using one of those manual Check Registers you get with your Checking Account. Mark down every charge to your account, especially Debit and ATM transactions.

Calculate and Adjust your balance after every few transactions just to be sure your balance is positive.

The Benefits?

You get peace of mind knowing you KNOW how much money is in your account. No more head-scratching about whether you understand the balance number you see on that ATM Cash Withdrawal slip.

The biggest Benefit? YOU are in control of your Money, not the other way around. You can only serve ONE Master. Make Money your Slave.