Some people enjoy financial automation. They set up automatic billing and direct deposit through their bank, they connect their bank accounts to mint or some other personal finance management service, and they let their money do what it needs to do.
I might be old-fashioned, but I don’t like the idea of automation. I am sure that it could make my life easier, but I like to have control over my money.
When we got married, I was checking my husband’s account one day (before we joined our accounts together) and noticed that there was a withdrawal of $19 for a local gym. I inquired my husband about the withdrawal, and he said that he stopped going to that gym more than a year before and just forgot to cancel it. HUH??? So, for the past year, he had spent $228 just because he forgot to cancel his membership? I couldn’t believe how careless he was with his money. I didn’t want that to happen anymore, so I vowed to always check our account and make sure the charges were correct and nothing was fishy.
© s_l / Dollar Photo Club
Enter my fifth mistake as the family financial manager. Since I was budgeting less and less this year, I was also checking our bank account less often. This led to a few times when we went in the red and had to start using money from our line of credit. That wouldn’t be a huge problem, except that it costs money to use the line of credit! The interest rate is nearly 10%! When we went in the red the two or three times we did this past year, I didn’t catch it right away and we owed some interest when I finally caught it.
Why It’s Important to Reconcile Your Accounts
It’s important to keep track of your money, whether you use cash, credit, or debit. If you are keeping track, then when you get your bank statement (either online or in the mail), you can compare the bank’s records with your own records. Here’s why you should get in the habit of reconciling once a month:
- To catch discrepancies. Your records and your bank’s records should match. If not, you should be able to find the discrepancies and fix them if necessary. Every once in a while you might notice double transactions (one transaction went through twice somehow) or transposed numbers (instead of $34.67 on your records, your bank records show $43.67). If you catch something fishy, bring it up with your bank or your credit card company.
- To make sure you have money in your account for bills and checks you’ve written. If you write a check in November, but the recipient doesn’t cash it until January, that could throw your records off balance or be a disaster in January if you don’t have the money in your account. Make sure to keep track of checks so you always have the amount in your account for when it goes through.
- To put you on the right foot for the next month. The longer you go without comparing records, the more likely you are to see a gap. You might think you have more money than you actually do or vice versa.
- To find charges that are automatically being deducted and get rid of them if you no longer use them. You might have forgotten to cancel your gym membership, and you will just keep paying that amount month-after-month until you notice that you’re still paying it.
Throughout the month, as you are recording transactions, do it in a spreadsheet that looks like a checkbook. Or you can record each transaction by hand in a checkbook register.
- It took me less than 10 minutes to follow the directions HERE to make my own checkbook register in Microsoft Excel. If you want you can download it: Simple Checkbook Register.
- You can also print out THIS checkbook register. It looks really simple to use.
The Most Efficient Way to Reconcile Accounts
Pull up your statements (start with checking and move on to savings, credit cards, and retirement) on your computer, and then open your spreadsheet with all the transactions you recorded. Or you can print out your statement and your transactions. Either way, put them side by side and just glance through both, making sure that there are no discrepancies, including fees, on your statements. It should literally take you less than 5-10 minutes each month to do this.
Do you reconcile your accounts on a regular basis?
Linked to: Thrifty Thursday (2nd time)
Want to know more about my job as the family financial manager? Check out these posts:
You Need a Bill Pay System
My Struggles as the Family Finance “Manager”
Mistake #1 – Quit budgeting
Mistake #2 – Mixed up wants and needs
Mistake #3 – Used credit cards for things we couldn’t afford
Mistake #4 – Overcomplicated our budget
Mistake #5 – Checked over our accounts less often
Mistake #6 – Saved $0
Mistake #7 – Spent bonuses
Mistake #8 – Bought low-quality appliances