In an age where cell phones can measure your heart rate, GPS can sort out the worst traffic jams and computers can predict your next words, the art of checkbook balancing has fallen unfashionably out of favor.
Electronic banking has all but replaced traditional paper statements and automatic bill pay all but eliminated the need to look through bills that come through the mail, yet respected financial experts such as Dave Ramsey and Kathy Kristof still recommend physically writing down every monetary transaction made.
Not Nearly As Obsolete As It Appears
Below are three scenarios that illustrate why relying on even the latest and greatest banking app cannot compete with the personal accountability that comes with old-fashioned checkbook balancing.
Scenario 1: Banking Error
Suppose you receive a check for $50 from a relative as a birthday gift. You go to the bank and deposit the amount. The bank makes an error and adds an extra zero to the amount, increasing your account by $500 instead of the expected $50. You crumple the receipt into your floorboard and drive off, perhaps only checking your account before making a larger purchase over the next few days.
Later that week, your relative catches the mistake and promptly visits his bank to resolve the issue. The issue is resolved and now your bank account is unexpectedly (but accurately) $450 thinner. In the interim, your spending habits were based off an inaccurate statement.
If you only rely on banking apps, you may not notice the error immediately and instead of spending throughout the week on the soon-to-be-corrected bottom line, your spending threshold might be falsely high.
By keeping track of your account without relying on high-tech aides, you can quickly catch banking errors. As Debbie Dragon from My Bank Tracker states, "While many banks rely on electronic transactions, there is still a margin of human error that can occur."
Financial writer Deborah Fowles of Financial Plan agrees: "Although your bank processes thousands of transactions accurately, it can make mistakes, and you typically have only 60 days in which to inform the bank of the error."
Scenario 2: Delay In Posted Amounts
Whether you wrote a substantial check for a wedding gift that was not cashed for weeks or you have a proclivity for swiping your card over the weekend, it can be a financially frustrating day when your online account reports an incorrectly large bottom line. Some online banking statements will acknowledge the difference between the ledger and available amount, but even the most advanced online tools cannot keep up with checks you have written if you do not record them.
Keeping up with your spending habits in all shapes and forms -- debit, credit, cash and checks -- is essential to accurately knowing your monetary situation at all times.
Capital One, in spite of having a substantial online banking presence, warns "Online Banking can always be your ‘go to' when it comes to monitoring your transaction history and knowing your current account balance, but it's just as important for you to keep a hard copy of your finances for your day-to-day records."
Scenario 3: Fraudulent Charges
If your account has been breached and the amount stolen is miniscule, you may not be aware of you compromised identity. Thieves do not have a standard amount they steal -- there is no code of ethics in identity theft -- and in larger scale heists such as the Target and The Home Depot breaches, the amount stolen from each card holder only needed to be mere pennies for the crooks to rack in big bucks.
As Kathy Kristof reminds, "Where an unfamiliar charge for a large amount would be spotted by most customers, little charges can go unnoticed."
Smaller amounts of just a few dollars or cents make the typical red flags of fraud pale. By simply recording every transaction you make, regardless of the payment form, you can help protect your finances.
While it may seem unnecessary to watch your monetary transactions so closely, the compulsive habit could save you -- and your identity -- an inordinate amount of money, hassle and stress.
Image credit: RikkisRefuge Other, Flickr
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