The role your check book plays in budgeting and getting debt-free
A young
girl asks me the other day, "is it important to balance
my checkbook to have financial
savvy?" She said sometimes she couldn't balance,
so she stops for lack of time. She said she just could
not understand why something so simple, is so important,
since the bank keeps all of her records.
I
responded by asking, "How important is it to eat"?
Balancing your checkbook for financial savvy is essential. When
you balance your checkbook (also known as reconciliation),
you can:
1.
Detect bank mistakes. These mistakes are rare, but when
they occur, they can be costly. An example is: the bank
accidentally debiting your account with another customer's
debits with a similar name.
2.
Detect errors made by companies you have written a check
to. An example, an unscrupulous business owner can alter
a check, obtaining more money than you wrote it for.
3.
Detect simple errors you make. Occasionally, when you pay
bills, it is possible to place the wrong check in the wrong
envelope, causing you to overpay for one bill, and underpay
for the other.
4.
Incorrectly subtract a check in your register when you're
in a hurry. This error can cause your balance to appear
higher than it actually is.
5.
Verify that you have been credited with all of your deposits.
An
incorrect balance from any of the above (1-5) can cause
you to write checks for insufficient funds. Writing checks
for insufficient funds is not only costly (bank and store
charges are excessive for returned checks), but in most
states, it is against the law.
So,
in answer to the young girls question, balancing your checkbook
is the number one criteria for financial savvy. If it
is taking too much time, you can try one of the following:
1. Take more time when you write and record a check, to minimize mistakes.
2.
Decrease the number of checks you write, that is use more
cash, so you will have less to balance.
3.
Try using a computerized program to keep tract of your
checking account. They are easy to learn, but there is
a slight learning curve, so you may want to take a class
to get started.
In MsFinancialSavvy
101 we look for ways to find money in our own budget
to save, invest or pay off a bill. Balancing
your checkbook monthly is a way to find money or to
save money to use for saving,
investing and early bill payment. Take your monthly
check reconciliation serious so you can become financial
savvy.
Lois Center-Shabazz is the founder of MsFinancialSavvy.com
and author of the 3-time award-winning personal finance book,
Let's Get Financial Savvy! ISBN #0971979502.
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