Jan 10 2012

Lost Art of Balancing Your Checkbook…

Category: Family,FinancePhil @ 12:02 am

I started to write about my move to a new personal finance software package and ended up on a completely different topic. I think this is an important subject, as I have two teenage boys and neither one of them has any money management experience. Fortunately, my oldest son started his first job last year, at the age of 16; it has been a very valuable life experience.  His first paychecks seemed to last less than a day, burning right through his pockets! To curb his spending sprees, I made him start a savings account; this was to save for college or something unplanned. After about a year, I can see that his paycheck has a little more value; it actually seems to last a little longer!  Now that he is spending more of his own money, he is starting to see the need for a little planning: gas for the car,  Subway, Slurpees, and going to the movies.

I did a Google search on the topic and it confirmed what I was thinking – people just don’t reconcile their checkbooks anymore! I think that ATM machines started the trend; with minimal personal effort and little training, we could easily see how much money was in our account – it was too easy.  On-line banking put the final nail in the coffin for  the “monthly reconciliation” process; the on-line systems are good at instantaneously showing us our financial situation.  I started using USAA this past year for just about everything, banking, credit cards, insurance, and investing; I even quit using Quicken to track my spending. Using their web interface, I could link accounts from different institutions, pay my bills, transfer funds, categorize and track my track spending habits. It is actually very well done and supports mobile devices too.  Unfortunately, on-line banks and services like Mint.com never implement the concept of reconciliation. Big deal you say, what’s the problem… it is all done by computer and computers never mistakes… right?

I liked these little quotes that I found on some forums, they truly show how technology has changed the perspective of the younger generations. I did not actually think I was that old, but apparently, I’m very old!  I actually have a budget and balance my checkbook.  Even stranger, I always enjoyed entering all of my transactions and monitoring my spending habits. Technically, I thought it was very cool, being able to pay all of my bills on-line (long before web banking enabled it) and even connecting to my financial institutions, downloading all of the cleared transactions. I tracked my  boys’ college funds and personal retirement funds; it was so fun to see all of the money I was making…  It was even more fun to watch my Fannie Mae stock plummet from $70 a share to $0.25. Needless to say, I don’t watch the market anymore!

Even with today’s technology,  you should balance your checkbook. I hope that all of the young financial planners out there, still see value in this practice. There are numerous good reasons, I just listed a few:
  • Checkbook balancing is a method of verification
  • Both banks and merchants can make mistakes
  • Overdrawn account, bounced check fees, monthly service fees
  • On-line Banking is not always real-time
  • Help you budget your money

I like to keep an eye on the transactions, I can easily make sure that I’m not double billed or paying for some unexpected transaction fee.  A topic for another post, is the value of budgeting. I bet even fewer people actually create monthly budgets. I have always maintained a personal budget, though not always been able to live within it!  Because I tracked my spending, I always knew where the money went and how big the problem was. I am back to using personal finance software; I manage and live within my budget and reconcile my accounts every month. It takes no time at all and I always know exactly where I stand. Unfortunately, I have not been able to get my son to balance his checkbook yet, but I do have all of his statements printed out and ready to go; we just never seem get to it. I now realize, this is even more important than I originally thought.. this is a fundamental life skill that I have to share with him, before he sets off on his own.

Over the past few years, a friend of mine has ranted about this problem several times; he actually wanted to teach high school kinds some basic money management skills. Amazingly, neither the public school system nor parents are teaching this fundamental skill, it should be no different from the other fundamentals: Reading, Writing, and Arithmetic. Now, you really know how old I am!  Here is good post that illustrates the point well,  Why Can’t Johnny Balance A Checkbook?

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