Why I No Longer Balance our Checkbook

For many years, balancing the checkbook was a regular monthly event in our household. Even after we fully migrated our financial record keeping to Quicken in the ’90s, I followed a regimented month-end account reconciliation procedure using paper bank statements.

No more.

Actually, I haven’t balanced a checkbook or formally reconciled a bank account since we moved from Bank of America to a rewards checking account at a community bank in May 2010.  There are two basic reasons for this change to a less rigorous mode of financial due diligence.

First, the need for account reconciliation has largely disappeared. Second, not reconciling or balancing the checkbook is part of my goal of simplifying my life, including our financial life.

For us, monthly account balancing and reconciliation accomplished two purposes: (1) validation that all of the transactions posted to our account –  and their amounts – were legitimate; and (2) confirmation of our actual account balance.  I have found that I can accomplish both of these purposes by at least weekly (and usually daily) online review of our checking account transactions.

Most of our checking account transactions are debit card transactions, electronic payments and direct deposits. These are posted almost instantaneously which means that our memories of the transactions are better.  The instantaneous account balance is right there to see, along with any pending transactions that will affect the balance.

Some may question whether I am spending more time with this more frequent monitoring. I don’t think I am. It takes me just a few seconds to connect to our account and a few seconds more to scan our recent transactions and check the balance.  Compared to month-end reconciliation, there is no lost memory head scratching trying to figure out what a transaction was for, etc.

There are extra benefits from this more frequent method of account verification.  It serves as a form of identity theft monitoring. If a transaction looks strange (hasn’t happened yet), I can check on it immediately.  (I also receive instant emails from the bank for any transaction that exceeds $100 and weekly emails with our account balance.)

Also, the account balance is updated in real time. This allows me to move money into and out of the account to maintain our balance near $25,000, which is the cutoff amount for earning Tier 1 interest, currently 2.8%.  (I love this rewards checking account.)

Finally, the online banking system allows me to quickly categorize and identify the payee of each transaction so that I can run reports later that summarize what we spent our money on and who received it.

Yet another benefit is that we no longer receive paper statements. This makes it easier for us  to travel and move about without worrying about what is in our mailbox and who might want to grab it for illegal purposes.

I’m certain that we are just one of many bank account owners who no longer receive paper statements or “balance the checkbook.” I’m speculating that most of the younger generation never has, period. Baby boomers grew up with no online bank account options so we were forced to go through paper reconciliation.

Have most of you moved away from regular account balancing and reconciliation?

 


Comments

  1. JMK says

    We used to get paper statements but have switched over to electronic statements posted monthly. Having said that, for our CC I don’t rely on those either, there just isn’t an option to stop them from being produced. We purchase virtually everything on our Visa for the flight mileage (except mortgage, property tax and electricity cannot be paid by CC). I keep a spreadsheet that is much like an old fashioned checkbook, one row per deposit or expense and the remaining balance beside. I plan our our spending about a year in advance. In many cases the amount is fixed and the timing predictable (mortgage every other Monday, cell bill 15th of the month etc). Gas and groceries I plug in an estimated amount in every week based on past history, and then week by week replace the estimated number with the actuall. Every Friday I review all the items on my spreadsheet and reorder them to match what has been posted on the VISA website. Then I pay off all the items they’ve processed. Then I skim off all the excess income in our accounts and either contribute to our retirement savings or make an extra mortgage payment.
    I update the spread sheet in about 5minutes on any day when I have a receipt (gas/groceries) and take about 20-30minutes on Friday to reconcile and transfer out the excess. The method means my spreadsheet tells me exactly where we really are, I verify transactions on my CC weekly and immediately move the excess to where it begins working for us. As a result I never look at the electronic statements they post every month. They are completely irrelevant because they don’t include all my recent payments, and a mix of paid and unpaid spending. The balance owing that they show is completely meaningless. Just like the balance at any second in our bank account is a meaningless number. I have to look at the spreadsheet to really know where we’re at. The bank balance may or may not include outstanding checks, doesn’t reflect 6 auto payments that will go on the credit card in the next 3 days, etc.

    With the exception of our electric bill, all our monthly bills charge automatically to our CC. Never a late payment (really good when we’re on holiday) and I only have one bill to pay. Our electicity provider won’t take credit cards so I have opted for an email notification that the electronic statement is available for viewing (generally about 2 weeks before the due date). I log into our bank website and set up an auto payment for 4 days ahead of the due date to ensure time for the transfer. Done. If we’ll be on holiday when a bill is due I set up the payment for a week ahead of what I think the due date will be and pay 10% more than what we have historically paid for that month (based on 7 yrs of history). Whatever I’ve overpaid will just sit a a credit balance and be applied to the next month when we’re back.

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