How to Manage Personal Finances: Chapter 7- Reconciling Your Bank Account
Author’s Note:
I am posting a text version of this entire book on Substack, and video versions on YouTube. Email ken@stltest.net for details on my 5th book’s publishing date in late ’24 or early ’25.
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No one likes flossing.
It’s a hassle, uncomfortable- and we don’t see an immediate benefit.
Sure, dentists tell us that flossing is important, but we may not see the benefits until we show up for teeth cleaning.
The same is true of reconciling your bank account.
You need to gather records, think carefully, and invest time.
However, just like flossing, reconciling your bank account each month is critical for long-term financial success.
Why bother? Two reasons…
Reconciling your bank account helps you identify errors- and possibly fraudulent transactions. Maybe your cable company overcharges you by $50. Or (worse) someone steals your debit card and charges items on your account.
The second reason: Subscription fees.
IndieWire reports that: “On average, streaming households now spend $61 per month for four subscriptions to different streaming services.” USA Today explains that average monthly spending for all subscriptions is $219.
If you reconcile your bank account, you can identify subscription fees that you no longer want or need.
Convinced?
Start with two documents
Here is Sally’s check register (checkbook) and bank statement for May:
Some transactions are not posted to both lists- those are the reconciling items. I’ve listed each reconciling item in a different color:
Items that are not listed in color are not reconciling items, and those transactions are posted to the check register and the bank statement. The next chart is the bank reconciliation:
The $4,170 adjusted cash balance fully accounts for all transactions in the check register (checkbook) and the bank statement.
Final note: Complete a bank reconciliation as soon as you can access your bank statement. The faster you find errors and fraudulent transactions, the better. If you put off bank reconciliations, you may be managing your finances with an incorrect bank balance.