Being able to keep good records of financial transactions is more about creating good habits and being diligent in keeping them, than being “good at it”. People can train themselves to keep their records in order.
Budgeting helps to keep money flowing as you want it to ( see post Adulting: Keeping a Basic Budget), but keeping a balanced checking account/transaction register helps you to know where you stand financially.
Some good habits to keep in mind are:
- Spend within your budget/means.
- Get a receipt for every transaction. (It is easy to forget throughout the day.)
- Have a place that you keep your receipts as you spend.
- Record those receipts by date in your register soon after the transaction. (The bank keeps records by the date and you should too. Record receipts that night or a few times a week).
- If a budget is being used record your receipts in the correct budget category.
- All transactions need information! When? Where? * What kind of transaction? Amount? (*Examples of kinds of transactions: Automatic Deposit, Deposit, Automatic Payment, Debit Card, ATM, Funds Transfer, Service Charge, Check Number.)
- Transaction register notebooks are free from your bank. Just ask for a few and you’ll have them when you need them.
- Try not to let your amount get too low. You don’t want to spend more than what you have and some banks want you to keep a minimum balance and above.
Reading Bank Statements and Online Banking Website: Being able to understand the basic banking terms used helps you to communicate clearly with the bank and your record keeping supplies. When I began learning about reading the financial paperwork I was confused because some of the terms are very similar to other terms in the financial world. Paper bank statements may not be used as much as when I started my checking account, but I am pretty sure they still exist and the terms do still apply.
- Debts: are amounts subtracted from your account balance. (AKA payment, withdrawal)
- Credits: are amounts “crediting” or adding to your account balance. (AKA deposits)
- Over Draft Fees: the amount you owe the bank for using more money than you have in your account (know your banks policy on this!!) You pay the bank back what you spent and then the punishment fee that they charge on top of it.
- Service Charges: any amount charged by the bank for an extra service they do concerning your account. Can also be an Over Draft Fee.
I said I was going basic with this info…
Before you begin the balancing part make sure that you have everything ready to go.
- Have a notebook, pen/pencil, and calculator handy. You’ll most likely need them. I always do.
- Make sure that all of your transactions are recorded by date.
- All adding and subtracting have been done to the best of your ability. There is no shame in using a calculator even for this simple math because you are dealing with a lot of numbers and mistakes happen.
Balancing your recorded amount with the bank amount.
- Compare your bank statement or list of transactions on the website to your register. As you go through check off one by one what has “gone through” the bank. There is a little box just for this purpose.
- Make a note on the notebook if there are any transactions that were missed while you were recording any deposits or receipts since the last time you balanced. (date, place, amount +or-) And work them into your register getting a new amount for your records.
- Use this new amount from your register to see if there is a difference from the amount the bank statement/website says you have. If there is more on one side or the other look over your records and the bank records to see if you can find what is causing the difference.
- Outstanding amounts, are amounts that you spent that have not come through the bank yet. They did not get the checkmark. THIS DOES NOT MEAN THAT YOU STILL HAVE THAT AMOUNT AVAILABLE. On the notebook you will add these amounts back to your final recorded amount to see if you can get your amount and the bank amount to “BALANCE”
- Using your budget information works the same way as the register. Just check off the info recorded for that transaction within the correct budget, and add back in (on the notebook) any money not used or that has not gone through the bank for the purpose of finding the balance.
- Make a note in your register/budget if you move any amount around permanently.