DebtFreeGuru.com's - Tip of the Week - Monday, February 21, 2005
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7 Steps to Taming your Checking Account
If your account's a
mess and you avoid statements like the plague, you're not alone. Put
yourself in charge by spending a little quality time with your money.
By Jenny C.
McCune, Bankrate.com (as seen on MSN.Com)
Most of us open our first checking account by age 20. But just because
we've had one for years, doesn't mean that we manage it properly.
When is the last time you balanced your bank account? If it's not part
of your monthly routine, your inattention could carry a price. If you
lose track of how much money is in your account, you could get slapped
with expensive insufficient funds fees.
But it's not hard to get a handle on your account. These seven simple
steps can help you keep your checking account under control:
1. Keep good records.
The more informed you are about your checking account, the better
equipped you'll be to read and analyze your bank statement.
"You have to have something to compare it to in order to know whether
it's right or wrong," says Michael Stahl, author of "Early to Rise: A
Young Person's Guide to Investing."
That means keeping track of account activity. And you do have choices.
You can keep a handwritten record of transactions using the register
that comes with your checks. Or use a software program, such as Intuit's
Quicken or Microsoft's Money 2005. The point is to have a record of
every check, deposit and electronic fund transfer that's involved with
the account.
2. Open your mail.
When the bank statement arrives, open it and put your record keeping to
good use.
"Do it right when you get the statement," Stahl says. "Don't wait."
It's better to examine your bank statement sooner than later for two
reasons.
First, if there are any mistakes, reporting them to your bank quickly
will ensure they get corrected. Banks usually will disavow errors if
they are reported more than 60 days after you received the statement.
Second, the fewer days that pass between when the bank issues a
statement and when you read it, the more in synch your records will be
with the bank's numbers. "It's less confusing and easier to balance your
bank statement if you do it as soon as you get it, not three months
later," Stahl says.
3. Scan first.
If you're pressed for time, you can get away with examining just the
account summary, says Susan Zimmerman of the
Zimmerman
Financial Group in St. Paul, Minn. It's usually listed at the
top of the page, and it recaps the state of your account: previous
balance, deposits and credits, checks and debits, service charges,
interest paid and current balance.
"At a bare-bones minimum, look over the summary information and see if
the figures are in the ballpark," Zimmerman says. For example, you can
see if the balance is roughly what you think it should be or whether the
amount of withdrawals is way too high. Look for any unusual or
unexpected fees.
Keep in mind that bank statements cover a set time period, say from Jan.
18 to Feb. 17, so any checks you've written around or after the closing
date won't be on the statement. Ditto any deposits you've made in the
meantime.
4. Spend quality time with your account.
Scanning is a good first step, but don't stop there.
"Go over the deposits and the checks," says Paula Wegner, vice president
of the First Eagle National Bank in Chicago. "Check all checks from your
bank statement against your check register. Check off all checks."
Wegner's emphasis on scrutinizing your posted checks is intentional. You
need to see whether your payment records match what the bank has.
Most bank statements will give you several ways of doing this. For
example, some allow you to see what checks have been posted by including
a copy of the check. The advantage: it shows you who the check was
written to. Even when canceled checks are part of your statement, your
monthly accounting probably will also include a list by check number of
your transactions. Here you'll see the check number, amount and when it
posted, but not the payee.
Similar information will be listed on incoming cash to your account. For
checks paid and deposits credited, make sure your records jibe with the
bank's books.
5. Call your bank immediately if you find a problem.
You'll be glad you closely followed your account's paper trail if you
find yourself in a situation similar to one encountered by financial
planner Zimmerman.
She got a notice from her bank saying that her youngest son's checking
account was overdrawn by 56 cents. It wasn't much, but it didn't sound
right. When Zimmerman called the bank, an officer there told her that
the account wasn't in arrears and the bank wasn't sure how she had
received the overdrawn notice.
Zimmerman's story had a happy ending (the bank acknowledged its
mistake), in large part because she was paying attention and immediately
acted on a discrepancy. If you report problems quickly, they're likely
to be fixed quickly and not escalate. It's also easier to track things
when they just happened vs. six months ago.
And by being prompt in your account reconciliation, you show the bank
that you are trying to stay on top of your finances. That diligence
could later pay off. For example, Zimmerman recommends that if you
bounce a check, and it's the first time, ask for forgiveness including
waiver of any fees.
"Lots of people don't realize that the rules can been waived and often a
bank will do that for good will," Zimmerman says. Of course, don't
expect to get off easy if you are a repeat offender.
6. Check daily balance summaries.
First Eagle's Wegner says that most people don't need to analyze their
daily balance summaries. However, there are exceptions: consumers with
interest-bearing accounts or those who must maintain a minimum average
balance.
Folks that fall into these categories may want to keep closer tabs on
daily balances to make sure their accounts are in compliance or to make
sure they are paid the appropriate amount of interest.
7. Keep tabs on your account between statements.
OK, maybe only truly obsessive people review their accounts daily via
phone or the Internet.
But periodic checking on your account between printed statements does
sometimes make sense. That's the case when you are expecting an
out-of-the-ordinary transaction: Has that payment to the Internal
Revenue Service been posted yet? Did that big freelance check clear?
Most of these tips don't take much time. And once they become a part of
your financial routine, you'll find it's easy to maintain a healthy
checking account.
DebtFreeGuru.com - Tip of the Week - Monday, February 21, 2005
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