You and your checkbook: It’s still a real balancing act
As Detroit’s tallest personal finance columnist, I’m regularly approached with all manner of vital money questions. “Should I use credit or debit?” “Pay down debt or save for retirement?” “Powerball or Mega Millions?” And, naturally, “How long can they come after me for that pizza check I bounced in college?”
So it was no surprise when my editor, The Crockpot Princess of Grosse Pointe Woods, asked, “Do I still need to balance my checkbook?”
To which I replied: “Sure, just as soon as you finish churning the butter and trimming the lamp-wicks. And while you’re at it, forge a couple of horseshoes.”
There’s no app for that
Thanks to the advent of online banking, text alerts and smartphone apps, very few of us keep the ancient custom of balancing the checkbook every month. For decades, the only accurate way to know how much money you had in the bank was to sit down with your paper account statement and match all the cleared checks to your check register. Then you subtracted all your uncleared “outstanding” checks (as well as the not-so-great ones), and that total matched the current balance in your check register.
Ha! I am just kidding, because that never happened. First, your amount of cleared items never matched the bank balance, usually by something like $13.57 and it took two hours to find the error, a process involving pencils, scratch pads, a calculator and tequila. Then you spent the rest of the evening trying to remember all the uncleared checks you or your mate didn’t write in the register, a process involving thrown crockery and no sex for a week.
To quote famed mathematician Albert Einstein: “Screw zis. Throw another 50 bucks in ze account to be safe. I’m going to bed.”
It’s all relative, anyway
Al’s not alone. According to StatisticBrain.com, 79 percent of us never or rarely balance our checkbooks. And while you can get along without nailing down every penny of your monthly cash flow, it can put you out of touch with where your money is going, says Susan Beacham, founder of the financial education site MoneySavvyGeneration.com.
“Balancing a check book is a good habit to be aware of what’s going in and what’s coming out,” Beacham says. “It’s absolutely necessary that you keep an eye on your money because nobody cares about it as much as you do.”
The first good reason: Banks make mistakes. The second reason: Checking every transaction on your account means you’ll spot scams and ID theft right away, and the sooner you report suspected fraud the more likely you are to get that money back.
The third and most important reason: If you overdraft your checking account, it’s likely to cost you $35 or more, warns Greg McBride, chief financial analyst of the consumer finance site Bankrate.com.
But I’ve still got checks left!
“The name of the game is preventing overdrafts by making sure there’s enough to cover whatever payments are upcoming,” McBride says. “Because, at $35 a pop, any slip-up is expensive.”
If you’re writing even 10 checks a month, that’s enough paper and enough lag time to distort your online balance. And, even when your balance is correct, it doesn’t indicate the pending electronic checks, online bill payments or automatic debits headed your way. To keep your balance in the black, you need a check register, money tracking program or online service, but those help only if you make the time to check your previous transactions and add your new ones.
However you manage it, balancing your checkbook is a dull chore, so make sure to give yourself a nice reward. As soon as you’re done, hitch up the oxen and head down to the tavern for a nice round of hoop-rolling.