When I mention balancing a bank account, most people give me a strange look. Hardly anyone balances their bank account anymore, opting instead to fly by the seat of their pants. They assume if their online balance shows they have money in the bank, they are good!
While everyone realizes this is a bad habit, it is one that most people participate in. Most think they can offset the risks by purchasing NSF (non-sufficient funds) insurance. This insurance is called overdraft protection. It allows the practice of going negative by overspending available funds, knowing the bank will allow you to overspend and charge you a “small” fee for their overdraft protection.
Typical fees run between $25 and $45 per transaction that uses overdraft protection. People who routinely use this service will often have more than $100 per month in overdraft fees. Another way of figuring this is they spend near $1200 per year for this overdraft protection. Ouch!
Most customers feel pretty good about their overdraft protection plans since this means their account never shows non-sufficient funds, and they don’t have checks declined by the bank.
This is crazy!
Why would you choose to give the bank this kind of money when it is so easily preventable? Bluntly speaking, an “overdraft” is a fancy word for NSF. Use of this service from a bank proves you are not managing your bank account properly.
Balancing your banking account monthly is the first step in recovering from this danger. When you balance it, you keep clear records of how much money you are spending and where, which will lead you to a long-term understanding of how much money you need and when.
Mistakes in your account can happen at either the fault of the bank or the account holder. The account should be balanced monthly. When balanced each month, it should take no longer than 5 minutes. Account holders should be in the habit of entering debits as they occur. This will limit the chances of NSF charges and free up unnecessary charges to be used for better things.
Balancing your account each month will take self-discipline. If you already reconcile your account monthly, congratulations, you are part of a very small group!
