We all have. Have you ever looked at your checking account balance to see if you could “afford” to buy something? Later that day or the next day, you get hit with an overdraft fee because you forgot about an automatic payment that came out later that day. I call that a stupid tax. I did something stupid and now have to pay for it. Do you actually balance (reconcile) your banking accounts? Does anybody? Some do. Those are the folks who are also budgeting and aware of where their money is going. They also balance their accounts. They pay attention to their money.
Understanding the types of money accounts available is crucial for managing money and wealth building. AND managing those accounts is critical. Reconciling your budget to your banking and investment accounts takes a little practice. But once someone learns how to reconcile their accounts and STARTS doing it, the process gets more accessible and easier until it’s second nature.
The process is simple.
- Record all transactions in the accounting register.
- Compare this to the monthly statement.
- Add up all deposits in the register which are NOT on the monthly statement and add this to the ending balance on the statement.
- Add up all withdrawals in the register which are NOT on the monthly statement and subtract this from the new ending balance from step 3.
- This number should match the ending balance in your account register. IF NOT, locate the error and reconcile it.
- Draw a line where your account last balanced.