One of the biggest problems the U.S. government has encountered in its 200+ years has been the creation of an annual balanced budget. Due to differing philosophies on financial priorities, the process to ensure everything is paid for has been contentious. Yet, many economists and experts believe a balanced federal budget is necessary. Not just to make sure the money is available to pay for items but to provide a sense of security to the public.
The same thing can be said for a balanced personal budget. Ensuring there’s money in every category gives you a feeling of safety and the belief you can handle an emergency if it pops up. It sounds simple, but there’s an element missing, for you can’t have a balanced budget without reconciling the money going out and coming into your bank accounts. Every month your financial institution sends you a statement via electronic or snail mail listing deposits, withdrawals, and cashed checks. Going through the statement and reconciling it against your balance sheet can tell you if any transactions were missed or added incorrectly. In the end, your budget may stay the same or, if corrections are made, give you more or less money.
Unfortunately, many people do not reconcile their bank statements against their budget ledgers, and this can cause some financial headache. Without an understanding of what goes in and comes out of your accounts can lead to a potential situation where you don’t have needed funds. And if that something is an emergency, the consequences can be detrimental. You may even be missing withdrawals from individuals who stole your bank account or card number, reducing your balance even further. Here are a few checklist items that can help you with the reconciliation process.
Make Time – Reconciliation of your bank activity takes no more than 30 minutes out of each month if there are no issues. Clear a part of your morning or evening to check the statement with your records and make sure there aren’t any other distractions that could cause errors in the examination.
Do It Early – I’ll admit it, there have been times where I’ve waited two or three months to reconcile my accounts, and that has caused nothing but issues as I’ve gotten confused about certain transactions. Try to do your budget balancing within a week of receiving the financial statement so the information is fresh in your mind.
Print It Out – This is more for those who receive their statements via email or pull them from their bank’s website. Avoid reconciling by going back and forth from your statement to budget software or online accounting site, because that can cause confusion and extend the time needed as you start from the beginning of the statement. Print out the most important pages prior to the start of balancing.
Check It Off – Lastly, check off each record you reconcile with your own records. Mark any questionable entries with a star or circle to return to them when done.