What is a check register and how important is it to have one? A check register is basically a log that shows the running balance of your checking account. You log in your deposits and withdrawals and keep track of how much money you have available.
What is a checking account?
Before we get into the check register details, let’s start with a checking account definition. A checking account is your main account for deposits and withdrawals. Unlike a savings account, a checking account will most likely have quite a few transactions to keep track of.
What is a check register?
Now that you know what a checking account is let’s talk about what the purpose of a check register is. A check register is where you track the transactions made into and out of your checking account.
You may be wondering why use a check register to track your transactions. Since banks are now online and you have immediate access to your deposits and withdrawals, why maintain a check register? And let’s face it, people are not writing as many checks these days so is this really even necessary?
The short answer is yes, it is recommended to use some form of a check register.
So, why use a check register?
Check out the 4 reasons to use a check register below before deciding if it is too much work.
1. Avoid overdraft fees
The transactions that your bank show online are only the transactions that have either cleared or are pending because you used your debit card. They do not necessarily include pending automatic payments and bill pay schedules or outstanding checks that have not yet been deposited or cleared.
If you are not accounting for future debits (money out) in your account then it is very possible you will think you have more money available than you do. This can lead to overdrawing on your account.
Overdrawing on your account is spending more than you have available. If you do this the banks charge you fees to cover that money. The fees can be quite costly and if you do it enough times there can be other consequences.
Keeping some form of a check register keeps you up to date with what your available balance is so that you avoid these fees.
2. Balancing your account with your check register
Each month your bank gives you a statement that lists all of the transactions that occurred in the previous month along with the account balance.
It is a good practice to balance (reconcile) your records with the bank records. You want to make sure that all of your transactions and that your ending balance match.
Banks are not perfect and they can make mistakes. It is much better to catch the mistakes early so that they can be corrected. It is also possible that you made an error on your check register in which case you want to correct that right away to avoid any future issues.
3. Use a check register to evaluate spending habits
Because using a check register records your spending you have the opportunity to evaluate where your money is going. You can add a category section to your check register to make it easier to summarize based on your budget categories.
Using a paper version may be more monotonous when evaluating but sometimes just writing the code down is enough to realize how often you are spending in a particular category.
If you are using a spreadsheet, software, or an app, it is easy to sort and filter by category. You can see exactly where you are spending your money in real-time without waiting for the withdrawal to clear at the bank.
If you need help using a check register, here are some check instructions for how to fill in a check register
4. Check your future balance for budgeting
If you have standard, scheduled expenses and income each month you can add them to your check register. I do this quite a bit, usually right after I balance my checkbook each month.
For example, if you have a rent or mortgage payment that is due on the first of the month, add that to your check register. If you have other payments such as credit cards, insurance, or bills that you know are coming due then add those too. This way you can see if your income will cover your standard scheduled expenses.
Whys is this important?
Doing this will help you set your budget for the month as well. If it looks like you will have extra income then maybe you can budget to pay more down on your debt or add more in savings. If it looks like you might be short, then review your budget for the month to determine where you can reduce some spending. Or, try to find some extra income-earning opportunities.
I don’t suggest entering future income and expenses out too far in advance. It can get confusing and lead to errors in your check register. However, a few weeks is probably fine if you want to have a clear picture of where you will be financially and what you might need.
In summary
Using a checkbook register really does have its advantages, even if you do not write checks and you do all of your banking online. You will know how much money you have available to spend (not what the bank app tells you). You’ll have a clear picture of where you are spending your money. It ensures that no mistakes were made by you or the bank. Finally, it can help you plan your monthly budget by getting an idea of what your future balance will be.
Thanks for reading!
Stay balanced,
Jill