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Balance the checkbook
Question: I don't have a checkbook, or checks, but what I do have is a joint ING checking account with my wife, and my own checking account through a local bank. Do I need to "balance my checkbook" on the account? It's not something I've ever had to do really, but I believe I understand how to do it. I haven't been overdrawn in some time, though I live pretty much week to week. I use a debit card and cash to make purchases and generally have a pretty accurate idea of how much money I have available. And, if I don't, I can call my bank, or use my mobile phone to check my balance at any time. Am I missing out on something or is the financial advice I am reading just dated? Christopher, Philadelphia, PA
Answer: The idea and practice isn't dated at all. The reason to balance your check book is to avoid overdrawing your account and getting hit with hefty fees. But technology has made it much easier to track our check writing (whether traditional paper checks or a debit card, an electronic check book) and avoid overdrawing the account and getting hit with overdraft fees. You should be fine so long as you're really on top of what's going on with your spending.
In other words, balancing a checkbook is a tool, not a personal finance "must-do" or even a personal finance goal. The concept isn't outdated, however. It's how we accomplish it that has changed for many people. They tap into the power of the web, the mobile internet, and calculators to monitor their money. It's what I do.
The good news is that technology makes it easier than ever not to overdraw your accounts--so long as you're disciplined about staying on top of the money. (And considering how profitable the overdraft business is to the banking industry far too many folks aren't balancing their checkbooks the old fashioned way or with new-fangled technology.) Some people prefer using a pen, a checkbook, and simple arithmetic. Whatever works is the right way.
A bigger point is that for most people the basics of personal finance are pretty automatic after they've tracked their spending, set up a basic budget, avoid carrying a credit card balance, don't overdraw their accounts, and save something every month. At that point, ballpark figures and estimates are fine. You save some percentage of your income every month in retirement savings plans and taxable accounts--10%, 15%, 20% of income?--then you're in good shape as long as you don't overdraw your account or carry consumer debt.
Chris's answer skimmed over the point about the profitable banking industry overdraft business. Banks make a lot of money on overdraft accounts, because too many people believe that checking online bank balances can replace good money management skills like balancing a checkbook. Balancing a checkbook is an activity that encourages good habits, such as reviewing expenses and spending trends. Since it forces you to write down each expense, it keeps you closer to your spending, whereas when you check a balance online it is too easy to ignore the individual expenses and completely miss how the money was spent. Balancing a checkbook is the simplest form of budget management. Those who find that they are not able to save money or avoid overdraft should return to balancing the checkbook, or should implement even more discipline and <a href="http://www.3dbudget.com" target="_blank">create a budget</a>.
