Wednesday, October 19, 2011

Making Sense of the Checkbook

When was the last time you cleaned up your financial clutter?

I'm talking about balancing your checkbook and actually reconciling it with the bank statements.

The last time I did mine was in April. It's a wonder we haven't bounced a check!

Photo courtesy of Mensatic at Morguefile.
 Today, I spent most of the morning printing bank statements, checking off every transaction and updating the checkbook. I was dismayed to find several transactions I hadn't logged from months ago. Seriously.

Then there's the automatic deductions for Netflix, life insurance and twice-monthly transfers to our savings account that haven't been logged in the actual ledger since April. That's a lot of cash we were pretending was still in our checking account.

I'm not a fan of automatic deductions. While they seem convenient, if, like us, you don't log them in right away, you rack up checking account deductions without actually deducting them from your balance. That's trouble waiting to happen. That, and it creeps me out to give a business access to my checking account. You know, they can jack your fees and you don't even notice until it's already gone through. Frankly, there's no other way to do Netflix and I hate to have to think about life insurance every month, so I'm okay with those two fees coming out automatically. But, I'm not going there with our other monthly bills.

After being married and handling the family checkbook for 15 years, I've learned a thing or two that keeps us from bouncing checks and allows me some slack time in taking care of the checkbook.

The first is it really works best if just one of us handles the checkbook in its entirety. In our family, that's me. I'm way more anal about it than my husband. I write every transaction in the ledger, make the deposits and pay the bills. After having a combined account for a year or two early in our marriage, I learned he uses Jedi powers to sense what he's got in the bank and makes purchases accordingly. I couldn't sleep at night under that rule. I've handled it ever since.

The second tip that works is to keep more in the checking account than your ledger balance actually shows. I call this the "cushion". I won't say how much ours is, but I've been building it up for several years and it's big enough that we weren't in any real danger of bouncing checks these past few months. This is key, really. Even if you don't want or need to keep a cushion, $100 will cover any surprise fees from the bank. More will give you room to be lazy with your checkbook a bit. Not that I advocate being lazy, but sometimes time is a huge factor for busy families. It's nice to know you're covered if you just don't have a spare minute to get to it.

I know banks have a similar service they call "overdraft protection". I call their version another chance for them to charge me a fee.  You might say I'm a bit old fashioned when it comes to my bank account.

Though it took a huge chunk of my day, I'm glad I freshened up the checkbook. With the holiday season approaching, that's one area I don't want cluttered right now.

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