Every once in awhile I get a shock when I look at my bank balance online. It’s not because I’m overdrawn, but I will notice that it’s less than what I thought I had.

The problem is that I don’t consistently balance my checkbook. I do check balances, and I do balance most of the time, but sometimes I forget to do it, and thus the shock when I look at my balance.

The importance of balancing your checkbook is so you really know how much money you have in your account. These days, being able to check our balances online gives us a false sense of security in thinking we know what our balance is at the time. The truth, however, is that it can only show you what transactions have actually taken place through the bank, and not tell you how things are overall.

For instance, with my business checks, sometimes the people I’m paying don’t get around to depositing that check for a couple of months. Without balancing my checkbook, I may not know that a certain check hasn’t been cashed yet and spend that amount. If I spend too much into that check amount, I’ll overdraw my account. It’s easy to do, and it can be scary.

Depositors have 90 days to deposit your check before it’s considered null and void. Some banks will cash checks older, but that’s not standard practice. Even electronic payments sometimes take longer than you expected to show up in your bank account; that goes both ways, by the way, as sometimes you receive payments electronically and might have to wait up to 7 days for it to show up.

There are two ways to balance your checkbook; the traditional way and the modern way. The traditional way is to take your monthly bank statement and follow the directions on the back of the form. It tells you to write out the balance the statement says you have, then on one side list all the checks and electronic payments and withdrawals you’ve made since the last date showing on the front of the statement. The smart move is to go through all the check numbers and mark them off in your check register to see if any checks are missing that should have cleared. If not, add those checks to your list of outstanding checks.

On the other side, list all deposits into your accounts. Total both columns up, then subtract all checks and withdrawals from the total, then add back all deposits, and that will tell you what your true balance is. If you balance to the amount in your check register, great; if not, see if you missed an entry.

Now, if you’re not writing down all of your checks, this next method is definitely for you. You need to have online access to your bank account. Then what you do is see what your balance is and go back at least two pages to see what checks are showing. If you notice check numbers missing and they’re recent, then subtract those from the balance showing online. If you’re going back two pages and you notice there’s a check number missing, go back at least one more page, and if you don’t see it then you’ll know that something it outstanding. Trying to guess what’s missing and for how much will be problematic, but at least you’ll be wary.

Truthfully, most people write certain checks for a consistent amount monthly, or at least close to that amount, so it may be easy to figure out what’s missing. If you happen to be a person who writes a lot of checks indiscriminately, you’re in some trouble.

If more people balanced their checkbooks on some kind of consistent basis, they wouldn’t overdraw their accounts, and thus face stiff penalties from their banking institutions. That’s never good, because it takes even more money from you that you probably needed. Be careful with your bank accounts and feel secure in how much money you really have to spend.