the CHECKBOOK issue CHECKBOOK ISSUE BOOK.indb 3 3/28/09 6:25:51 PM

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1 the CHECKBOOK issue

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3 Things that make you go hmmm... Transpose What???? Transposed numbers = TROUBLE BALANCE GOOOOOOD! - Balancing your checkbook accurately should bring a sense of pride Sponsor Thank You: First Command Educational Foundation is grateful to the many corporations, nonprofits, and individuals who sponsored the development, printing, and distribution of our high school curriculum. Through your generous sponsorship(s), students and high schools across the state of Texas are able to receive this curriculum free of charge. Without dedicated companies/individuals like you, this would not be possible. THANK YOU! 1 FirstComm Plaza, Fort Worth, TX Tel : Toll Free: Fax: edufoundation@fcef.com FCEF MISSION Promote and provide education as the foundation to a productive society through scholarships and financial literacy programs. THE CHECKBOOK Table of Contents ISSUE Introduction Terms to Learn Check Register Balancing Your Checkbook Conclusion September 2008 First Command Educational Foundation. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means or stored in any information storage and retrieval system without prior written permission of First Command Educational Foundation,1 FirstComm Plaza, Fort Worth, TX These materials are for educational purposes only and are not intended as financial advice. First Command Educational Foundation does not endorse or favor any commercial supplier, product, or service. THE CHECKBOOK ISSUE 1

4 INTRODUCTION This module provides will provide information on what on what is goes into recorded a check in a register check and register how and to balance how to your balance checkbook. your checkbook. Technological Technological advances have advances made it have easier to access made it your easier money to access in a bank your account. money. Online bank- banking, ATM machines, ATM machines, and debit and cards debit are cards trouble-free are conveniences trouble-free ways that simplify to simplify how how you make you make purchases and purchases pay bills. and pay bills. Even with all these amenities, features, you still have to to keep track keep of track what of goes what in goes and what in and comes what out comes of your out checking of your account. checking account. 2 THE CHECKBOOK ISSUE

5 TERMS TO LEARN ACH (Automated Clearing House) The An automated Automated electronic Clearing House network is that an automated exchanges electronic funds via Electric network Funds that Transfer exchanges (EFT) funds throughout via Electronic the U.S. fifty Funds states Transfer and territories. (EFT) throughout Over 98% the of U.S. the fifty nation s states financial and territories. institutions, Over including 98% of the Federal nation s financial reserve Banks, institutions, belong including to the ACH. the The Federal ACH Reserve only Banks, processes belong electronic to the ACH. transfer. The ACH only processes electronic transfers. ATM (Automated Teller Machine) ATM A computer (Automated terminal Teller that Machine) allows banking A transactions computer terminal a convenient that allows location. automatic They are banking transactions found virtually in everywhere: a convenient at location. grocery They stores, are found virtually banks, malls, everywhere: on ships, at and grocery as freestanding stores, banks, malls, on drive-thrus. ships, and To as obtain freestanding money from drive-thrus. an ATM To machine, obtain money an ATM from card an from ATM your machine, bank and a ATM PIN card (Personal from your Identification bank and Number) a PIN (Personal are required. Identification Some credit Number) cards assigned may also to be your used card for are cash required. advances Some at ATMs. credit cards may also be used for cash advances at ATMs. ATM ATM Card Card A plastic card used in an Automated Teller Machine (ATM) plastic to withdraw card used funds in an from Automated an account, Teller deposit Machine (ATM) to withdraw funds from an account, deposit to an account, or transfer funds between accounts to an account, or transfer funds between accounts within a bank. within bank. Bank A An commercial establishment establishment for ending, for issuing, the custody, borrowing, loan, exchange, exchanging or and issue safeguarding of money for money. the extension of credit and for facilitating the transmission of funds. Check A Any bill written of exchange document drawn instructing on a bank a bank and payable to pay on money demand. from Checks a writer s have account. become Most the checks chief form are of not money paid in in cash the domestic but by a subtraction commerce or of an developed addition countries. to a depositor s As a written account. order to pay money, a check may be transferred from one person to another by endorsement (signature). Most checks are not paid Check Register in Log, currency book, or but journal by a subtraction where each or check, an addition debit card to a depositor s transaction, account. fee deposit, There or are credit several to account special is forms of posted. checks. Cleared Check Register A Log, check book, that or has journal cleared where the each bank check, has debit been card paid by transaction, the bank and fee, deducted deposit, or from credit you to account. an account is posted, usually sequentially. Debit Cleared Card A plastic check that card has with cleared a magnetic the strip, bank which has been is paid used by the to bank automatically and deducted deduct from money your from account. the bank account of the cardholder to pay for goods or Debit services. Card It usually looks like a credit card but deducts A plastic funds card with from a your magnetic account strip, immediately. which is used to automatically deduct money from the bank account of the cardholder to pay for goods or services. EFT It usually (Electronic looks just like Funds a credit card Transfer) but deducts funds The transfer from your of funds account from immediately. one bank account to another bank account utilizing the Automated Clearing EFT (Electronic House Funds network. Transfer) The transfer of funds from one bank account to another bank account utilizing the Automated Interest Clearing House network. A fee paid for the use of money or paid into a bank account. Interest A fee paid on borrowed capital. Overdraft Protection Protects Protects against against overdraft overdraft fees fees if if an an account account is is overdrawn. If the overdrawn. Some overdraft overdraft is attached protection to an is associated like a loan. savings You account, will repay the the bank bank will for remove the overdraft the money amount from your plus savings interest. and Overdraft transfer it protection to checking should and be may exercised charge you in an a fee emergency, for the transaction. not used regularly Some to cover overdraft a hot protection check. is like a loan. You will repay the bank for the overdraft amount plus interest. Overdraft protection should be exercised in an Voided Check This emergency, a check not that used has regularly the word to void cover printed a hot check. across the front by the owner. A check may be voided Voided because Check an error was made or because it is This required is a check to set that up has an automatic the word void bill payment printed or direct across deposit the front plan. by the owner. A check may be voided because an error was made or because it is required to set up an automatic bill payment or direct deposit plan. THE CHECKBOOK ISSUE 3

6 Item No. CHECK REGISTER A check register is basically a booklet that is kept in your checkbook and contains lists important information about each financial transaction. Below is an example of the Below information is an example you need of the to information put your check you will register. need to put in your check register. Date Description of Transaction Payment, Withdrawal, or Free Amount Code Amount of Deposit or Interest Balance A B C D E F G H (What the Check is for) Record the following information in the columns indicated above: A. ITEM NO. The check, deposit, or other transaction number, if there is one. B. DATE The date on which you wrote a check, made a deposit, withdrew money, or were charged a fee. C. DESCRIPTION OF TRANSACTION The organization or person to whom you wrote the check. In the gray area below, write the purpose of the check. D. PAYMENT, WITHDRAWAL, OR FEE AMOUNT The amount of the transaction. ( ) E. CHECK MARK Mark this column as you are reconciling (balancing) your checkbook. F. CODE This optional column is to help you record the type of transaction. (codes (Codes are listed in the register.) register) G. AMOUNT OF DEPOSIT OR INTEREST This column is for your deposits, any interest earned paid into on your account, or or any other credits to to your account. H. BALANCE Calculate the balance each time you record a transaction by adding or subtracting as appropriate. 4 THE CHECKBOOK ISSUE

7 BALANCING YOUR CHECKBOOK The best time to balance your checkbook is the when same you day receive you receive your monthly your monthly bank bank statement. statement. The fewer The fewer transactions transactions you ve you ve made incurred since the since date the the date statement the statement was prepared was prepared by the bank, by the the bank, quicker the quicker and easier and easier your your reconciliation will be. will be. 1 Reconcile Your Checks The first step is to determine if there are any checks that haven t cleared the bank yet. You can You sort can sort your your canceled canceled checks checks in number in number order, or use the list of cleared checks that most banks provide with the statement to check off each canceled check that has cleared. Make sure the amount you recorded for the check is the same amount the bank shows. It is easy to transpose numbers when writing the check amount in your register (i.e. (writing $53.94 instead of $53.49). 2 Reconcile Your Deposits Make sure each deposit shown on your bank statement is recorded in your check register (especially if you have direct deposit, which you can easily forget to record). Next, go through your deposit slips, paycheck stubs, etc., and make sure the bank statement shows all the deposits you made. Check off the deposits in your check register as you did for checks. THE CHECKBOOK ISSUE 5

8 6 4 5 Reconcile Your ATM Withdrawals and Dedit Card Purchases 3Go through the same process for ATM with- Go through the same process for ATM withdrawals or debit or debit card card purchases, checking off each transaction on the bank statement in in your your check register. If If the the bank shows transactions that are not included in in your check register, record them now. Record Interest Earned and Bank Fees Check your bank statement for any other fees and subtract them from your balance on the checkbook register. Remember to add any interest earned. Note: If your bank statement lists all transactions in sequence by date you can actually complete steps two, three, and four simultaneously. Complete The Balancing Form Most banks provide a form on the back of the bank statement that you can use to balance the account. The instructions below assume you re using our checkbook balancing form, but you can always use the form on the back of your bank statement. The procedure will be the same. THE CHECKBOOK ISSUE 1. Go through your checkbook register and list any outstanding checks on the balancing form. These are checks and other debit transactions that you did not check off in your register as you completed steps one and three. These are transactions that have not yet cleared the bank. 2. Total the column of outstanding checks, debits, and ATM withdrawals. 3. Go through your checkbook register and list the outstanding deposits (credit transactions) on on the the balancing form. These are deposits you made after the bank closed out the reporting period that you did not check off in your register in step two. They were not listed on your statement. 4. Total the column of outstanding deposits. 5. Fill On out line the a. of Balancing the Balancing Form. Form, enter the ending balance shown on your bank statement. 6. On line a. of the Balancing Form, enter the ending balance 6. On line shown b. of the on your Balancing bank statement. Form, enter the total of your outstanding deposits. 7. On line b. of the Balancing Form, enter the total of your 7. On outstanding line c. of the deposits. Balancing Form, enter the total of your outstanding checks and ATM or debit 8. transactions On line c. of the Balancing Form, enter the total of your outstanding checks and ATM or debit transactions. 8. On line d. enter bank service charges or fees. 9. On line d. e. enter bank interest service earned. charges or fees. 10. On Use line a calculator e. enter interest to total earned. the numbers you just entered on the form, adding the pluses and 11. subtracting Use a calculator the minuses. to total Enter the the numbers new total you on just entered line f. This on should the form, equal adding the balance the pluses shown and subtracting checkbook the minuses. register. Enter the new total on line f. This in your should equal the balance shown in your checkbook register. 11. If it doesn t, check for math errors in your checkbook register, such as reversed (transposed) 12. numbers If it doesn t, (for instance, check for $53 math instead errors of $35), in your checkbook subtracting register, a deposit such as instead reversed of (transposed) adding it, adding a numbers check written (for instance, instead of $53 subtracting instead of it, $35), automatic subtracting payments a deposit that instead you forgot of adding to record, it, adding etc. a check written instead of subtracting it, automatic payments that you forgot to record, etc.

9 BALANCING FORM Outstanding Deposits (Not included in your statement) Outstanding Checks (Not included in your statement) DATE AMOUNT CHECK # AMOUNT 4 TOTAL TOTAL a. Ending balance from the bank statement $ b. Add total outstanding deposits + c. Subtract total outstanding checks - d. Subtract bank fees - e. Add interest earned + f. New balance (should equal the checkbook balance) $ 9 THE CHECKBOOK ISSUE 7

10 CONCLUSION 4 There are several different ways you can remove money from your checking account: ATM machines, debit cards, check-writing, etc. With all these different methods available, it is sometimes difficult to remember what came out when. The best way to keep track of your expenditures is to write them down in your checkbook register as soon as possible and go over your bank statement thoroughly at least once a month. 8 THE CHECKBOOK ISSUE

11 DREAM BOLDLY. Life together brings opportunities. Challenges, too like managing your money to make the most of it. So it s good to be confident in a financial plan to pursue your goals, with banking solutions for everything from financing your new car or home to consolidating and reducing debt. Learn more at firstcommand.com, or call to share your dreams with a trusted Financial Advisor today. Plan confidently. Investments. Insurance. Full-servIce BankIng First Command Financial Services, Inc., parent of First Command Financial Planning, Inc. (Member, SIPC, FINRA) and First Command Bank (Member FDIC / Equal Housing Lender). Financial planning services and investment products, including securities, are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Financial Services, Inc. Banking products and services are offered by First Command Bank. In certain states, as required by law, First Command Financial Services, Inc. does business as a separate domestic corporation, and does business in California as First Command Insurance Services. Securities products are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met.

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