Do you carry a checkbook with you, and if so, does it have a paper check register? Maybe both of those things are always with you. Perhaps your checks sit on a desk at home for occasional use, or maybe you never even ordered checks the last time you opened a bank account.
Whether you write actual checks daily, weekly, monthly or almost never, you may still benefit from keeping a check register. However, this doesn’t have to mean carrying around the paper log from your bank. There are a lot of options for tracking your finances.
What is a check register?
What most people call a check register is probably better described as an account log. It’s a place where you show your starting bank balance, then track any debits (expenses) or credits (income), noting the new balance as you go.
The name check register came from when most expenses were paid by check, with those checks sometimes taking quite a while to clear the bank. At that time, the best way to know for sure how much money you had available was to know what checks were still outstanding. Even if the bank “said” you had $1,000 available, if you knew you’d written checks for $700 that had not cleared, you would know only $300 was available to spend.
As most banking has gone digital, many transactions clear immediately, and most banks offer online access. In many cases, you can go to the grocery store, check out, and open your online banking app before you get to your car and see the pending transaction reflected.
Because of this, many people have stopped keeping any kind of account log; instead, they just open up an app or website or call their bank and get their current balance, and then spend accordingly.
So why is an account log or check register still important?
One of the biggest factors in good financial decision-making is accountability. Simply put, when you know you will need to keep track of a particular decision, it may change your actions.
Taking notes also increases awareness. This is true whether you’re writing by hand or logging digitally. By doing something that causes your brain to register the income or expense, you’ll be more cognizant of both that transaction and your overall financial picture.
It’s also important to keep some kind of log when you’re making multiple purchases at once.
It may be fine to call your bank, get a balance, then go to one store and buy a pair of shoes. However, what happens when you need to go to three stores to buy three different things? It can be cumbersome to call around in between, and it’s possible the earlier transaction won’t have applied yet, giving you an incorrect idea of your balance.
The same thing happens if you have one day a week or month when you sit down to pay your regular bills. If you look online for your starting balance, you’ll end up needing to keep some kind of running log as you pay each thing anyway.
So how can you create an account log or check register to help you in these situations?
Getting started with an account log or check register
If you’re new to using an account log, you’ll need to know the following:
- Your current account balance, per your bank or credit union
- What transactions are still pending or have not yet reached the bank
If you don’t know what charges you have that are still pending, a good thing to do is withdraw enough cash to last you for about a week, then check your balance at the end of that time and start from there. Almost any debit card purchases will have cleared in that time, and then all you’ll have to do is figure out if you have any checks that aren’t accounted for.
Once you have a starting balance and a list of pending transactions, there are two primary ways to create an account log or check register.
Keeping a paper account log or check register
The traditional method, in which you use a paper check register provided by your bank or the company that prints your checks, is a good one for many people.
This method doesn’t require a ton of explanation. You enter your starting balance, matching what the bank shows. Then, on each line, list one expense or income item and its dollar amount, then add or subtract appropriately and enter the new balance at right.
- This is a simple method and can be managed anywhere you have a pen, with no worries about having a smartphone or computer handy.
- It’s quite secure. Unless someone steals your physical register, there is no information to be had about your purchase or income history.
- There is some evidence that writing things down by hand has a larger impact on memory than digital note-taking. That may mean this method could increase your financial awareness more.
- If you share an account with a spouse or other person, generally only one person has the check register with them at a time. This can make it hard for both people to have a clear financial picture.
- It can be hard to remember to carry your register. If you don’t carry a bag (whether a purse, attache or something else), it can be too bulky, as it doesn’t usually fit in a pocket.
Keeping a digital account log or check register
There are many methods of digital logging. Here are just a few:
- Using a free online file storage service like Google Drive to keep a spreadsheet of expenses and income.
- Using an app like Moneywiz or Wally to track your finances.
- Using a service such as Mint or You Need a Budget as a log.
In any of these systems, you’ll need to enter a starting balance and list each transaction.
With an app or service, you may have the option to include other information, such as a category. These tools will automatically calculate your running balance for you after each transaction.
Using Google Drive or any similar service, you have the ability to add any columns you like to your tracking spreadsheet. You’ll also want to use a formula to make sure your balance is correctly calculated.
- Many of these tools have neat bonus features, like the ability to see a graph of transactions by category or the ability to set a budget for a particular type of expense and know how much money remains in that category. Some also auto-populate based on your previous transactions, which can save you time.
- No math required! You don’t have to manually add or subtract when you have a new transaction.
- Most people find these tools convenient. Many people have their phone handy, even when they don’t have almost any other personal item with them.
- If you have multiple people with access to the same account, everyone can see the current account information at once. This is great for couples with joint finances.
- Some people find online services to be less secure. While keeping your password information safe can help you avoid most problems, it is certainly a concern worth considering.
- The more automated a system is, the less personal attention you need to pay to it. This may seem like a benefit, but it can lead to decreased awareness and accountability.
Reconciling your account
As you log your transactions, you should make it a point regularly to sit down and see how what you have matches up with what your bank or credit union says.
To reconcile your account, take your paper statement or your bank’s online record of transactions. Start at the top of your bank’s list. For each item listed there, mark the matching item in your record as “cleared.”
In a paper check register, you can use an X in the predefined column. Using a spreadsheet, you should create such a column and make a mark in it. Online services or apps will each have a way to do this.
Once you have marked off all of the items listed by your bank or credit union, take your current balance and subtract any un-marked-off income, then add any un-marked-off expenses.
Remember, this is an “opposite.” If you have income the bank doesn’t show, you need to subtract, not add, it from your total. Similarly, if you have an expense the bank or credit union doesn’t, you need to add that amount to your balance.
What you should end up with is a number that matches the balance listed by your financial institution. If you show more or less, go back through your list and see if you missed anything the bank shows, or if you accidentally marked something as cleared that the bank does not show. Keep doing this until your balance and the bank’s balance match.
If you want to know more about personal bookkeeping and account management, we can help. Contact us today to schedule your appointment. Email Cinda@CowderyTax.com or call 740-374-6942, or simply fill in the form below.