In a previous blog  Why a High Interest Checking Account? I discussed some advantages and disadvantages of using smaller community banks and credit unions. Today I would like to discuss a simple concept yet pertinent to your financial health and that is balancing a check book.

It continues to amaze me how many people I meet that tell me that they keep no records of their spending. Coincidentally these are also the same people who have no idea where all their money disappears to and frequently receive overdraft notices in the mail. I simply can not stress enough the importance of keeping accurate records of your spending. By doing so you can examine your spending habits and plug any holes that leak hard earned cash. This information has several other uses such as planning a budget, saving for an event, or cutting expenditures due to loss of income.

Balancing a check book is a task that is dreaded by some and even neglected by others. The thought of sitting down with a checkbook and penciling in all of those bad spending habits can often create feelings or sadness and regret. I found that using a program such as Microsoft Excel can not only help you keep  up with your money and avoid overdraft fees but also  be a useful tool when examining your spending habits. With a little knowledge of your favorite spreadsheet program and some patience you can balance your checkbook 21^st century style and here’s how:

1. Pay for all your purchases using either your debit card or credit card and get a receipt. You should always avoid paying for goods or services with cash. The reason being is that cash can be spent easily and then forgotten. Think about all the $100’s and $20’s that you have spent and hours later had no idea where it went?
2. Save the receipt. Keep your receipts in a safe place such as your wallet or purse
3. At the end of every week empty out your wallet or purse and sort your receipts by date
4. Create a simple Excel spreadsheet with  several columns titled  Date, Name, Grocery, Prepared food, Entertainment, Haircuts, General merchandise, Clothes, Bills, Gas, Gifts, Deposit, Balance, Etc. You will have to tailor these columns to be congruent with your lifestyle. (See fig 1. below for example) Write a simple formula used to keep a running balance.
5. Log all your receipts for the week placing the dollar amount in the appropriate category.
6. Total up each column at the end of the month.
7. Continue this process for several months
8. Create visual representations reflecting your average spending habits for past months.

For those who are not familiar with using a spreadsheet and have no desire to learn how to use them I would recommend implementing the same strategy except enter your receipts into some form of money management software such as Quicken or Microsoft Money. Www.mint.com offers a free online money management program. Although these programs have some cool bells and whistles I still prefer using a spreadsheet program because it is fully customizable.

Fig 1. EXAMPLE OF SPREADSHEET