Ever wonder why the amount left on your account is called a “balance?” That’s because you should get that same number after you “balance” your checkbook.
Like budgeting, all it takes to balance a checkbook is addition and subtraction. However, budgeting and balancing serve different purposes. Budgeting is about looking ahead, whereas balancing is about looking back.
Nowadays with all the available money tracking tools, most people don’t bother to balance their checkbooks. However, I strongly encourage you to add this exercise to your monthly routine, so you can monitor how well you are doing against your budget. Are you spending what you originally planned? Do you need to make tweaks to your ongoing budget?
Let’s use the following example to illustrate how to balance your checkbook. Feel free to substitute your own numbers.
Start with $2,000 in your bank account at the beginning of the month.
Add (+) $3,000 in earned income.
Subtract (-) $1,000 for rent.
Subtract (-) $200 for utilities.
Subtract (-) $200 for transportation.
Subtract (-) $100 for Internet / phone bills.
Subtract (-) $1,000 for purchases related to food and miscellaneous shopping.
After doing the math above, we are left with $2,500. This number should match the remaining balance on the bank account at the end of the month.
There you have it! Now you are an *ace* at balancing your checkbook!
Homework: Balance your checkbook for last month. Did your actual spending match your budget?
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