In the age of ATM and credit cards, most people don't think about their checkbook or what the balance in their account may be. Some pay close attention, while others do the math in their head. Some people do not feel that being totally accurate is important because they may have overdraft protection on their account, but this is an expensive way to figure out you added or subtracted incorrectly. You may not use your checkbook a lot, but there are still times when checks are the best option. Make sure you know how to do a bank reconciliation so that you know your account is exactly where it should be.
Doing a monthly bank reconciliation does more than just keep your account balances correct in your mind and in your checkbook records, though that is one of the most important reasons why a bank reconciliation is important. If you keep track of each and every debit and credit in your account, you will never accidentally go over your limit or spend too much thinking you have more in your account than you did. It is very easy to forget about a check that has not cleared if you have not written it down.
When you do your bank reconciliation, you can then see exactly why you have overdrawn your account. You should do this by checking your listings in your check book by your bank statements each month, or at least once a quarter. You can easily do it more often if you wish as most banks allow you access to your account information online any time you want it for any time period you wish. Look at what you have in your records and what the bank has listed, and then do your bank reconciliation accordingly.
What you may find is that a check you wrote has not cleared. If this is for an important bill, this is important to find out as soon as you can. If your check for your electric bill was lost, it will be in your best interest to find out as soon as you can so you can call them and make arrangements to cancel that check and pay your bill. If you did not do this bank reconciliation and did not know the check had not cleared, you could get a disconnection notice and have no idea why. Even worse, you may come home to a house with no electric. Even if it was an error, it'll be a huge pain for you.
Bank reconciliation can also help you if you are the victim of identity theft. If the numbers you see when you check your account seem off, you may not think about it much until it happens a few times. If you are doing a timely bank reconciliation, you may find charges that you did not make much sooner. That allows you to stop the problems as soon as you can and to report the problem to your bank and any other relevant people. You can find any type of error this way, and any of them can cost you a lot of money if not found. Think of a bank recognition as being financially proactive.