Finance: Learning to Balance Your Accounts the Old-Fashioned Way

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First, compare the balance you've calculated to the balance the bank statement shows. Which is bigger? If your balance is greater than the bank's, you're probably missing an expenditure. If your balance is less, you might be missing a deposit.

Now look at the amount by which you're off. Sometimes that amount will ring a bell. Perhaps an overage of $7.50 will prompt you to confirm you've figured in the monthly account maintenance fee, or maybe something around $20 is likely to be one of those Amazon.com impulse purchases you sometimes forget to record. A deficit of $15.89 might remind you that you returned a defective CD a few weeks ago and they put the refund on your checking account Visa.

If pondering the amount doesn't bring a revelation, break the problem down into sections. Most bank statements provide subtotals that come in handy in this situation. Chances are you will find the discrepancy in one of these subsections. If your calculated balance is less than the bank's, add up your deposits and compare the total to the deposits subtotal on the statement. If your balance is higher than the bank's, try adding up all of your checks or all of your ATM transactions and comparing it to the subtotals shown on the statement.

If it still doesn't work, check all of your amounts again, figure by figure. Perhaps you've transposed numbers in one check amount, or perhaps you jotted down the wrong amount on an ATM deposit envelope.

Rarely, you'll find an actual error in the bank statement. If it's a large enough amount, call the bank and ask them to correct the error; if it's not worth the trouble, adjust your records and get on with your day. Remember the value of your time: Is a $1 refund worth 15 minutes on the phone? If not, record a $1 debit in your register for Bank Error to correct your balance.

Tip
If your check register is a mess – items crossed out or squeezed in between lines, with the running balance rewritten several times – draw a big, bold line under the last item written in the register and start over. On the first blank line, write, "Reconciled balance as of [date]," and record the amount you just calculated. Now you can resume recording new transactions and keep an accurate running balance.

Replacing Lost Papers
Suppose you're ready to turn over a new leaf and finally get your bank accounts balanced but you can't find some of your recent statements. Argh! What now?

Don't fret: Most documents can be retrieved from their sources. You can begin your new system with just your most recent bank statement, but if you really want to start with January, contact your bank. It should be able to provide you with duplicates of your statements, probably for a fee; it might also be able to give you access to the data online as an alternative to paper copies. Either way, the data exists somewhere within the bank's system; it's not lost forever.

The same is true of just about any record or statement you receive from another company. If you need past utility or phone bills, contact each utility for its procedure. The person who handles payroll for your employer can tell you how to obtain old check stubs or an earnings summary for the year. Your broker should be able to help you track down past investment statements. You can even obtain copies of past tax returns from the IRS. Use Form 4506 to get an exact copy for a fee or Form 4506-T for a free transcript, which is acceptable for most purposes. Visit www.IRS.gov and download the forms or call 800-829-1040 to request the forms by mail.

To do list

• Explore the various software options available.
• Learn how to use the assisted reconciliation function.
• Take advantage of the ability to categorize transactions.
• Review other advanced functions included with some programs.
• Choose and set up financial software.