How do I manage my checking account?
You ever get that little feeling when you swipe your debit card, like maybe you should have a better handle on what exactly is going on in your Checking Account? Or maybe you’ve been hit with overdraft fees?
The fact is:
A Checking Account is a responsibility, and effectively managing your Checking Account is part of the deal. It sounds tedious, but you can easily start building habits to make account management part of your daily routine.
Why is it important to manage your checking account?
It is so easy to slide into an “out of sight, out of mind” mentality when it comes to your Checking Account. You know you’re putting money in, hopefully via direct deposit, and you’re kind of, sort of careful about what you’re spending.
But here’s the problem:
Most of us have at least one bill payment or subscription automated, and there are any number of delayed transactions (hello gas station charges), making it very easy to accidentally draw your account negative. This is referred to as overdrawing your account and it’s a one-way ticket to unwanted fees.
When you overdraw your account, one of two things will happen. If you have overdraft protection, your financial institution will either cover the expense for you or automatically move money from your Savings Account or a Line of Credit to cover the expense. In either situation, you will likely be hit with service fees. And, if your overdraft protection is tied to a Line of Credit, you’ll also be paying interest on that advance.
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If you don’t have overdraft protection set up, your transaction will be denied. And you guessed it, most financial institutions will charge you an insufficient funds change.
There are few more frustrating expenses than service fees, but avoiding them is relatively simple.
Stay on top of your Checking Account. Think about this: do you know exactly what day your gym membership comes out of your account? What about your car insurance? Credit card payments? Utility bills? Pet subscription boxes? And while none of these may be huge expenses, going even a penny negative means you'll be incurring fees.
By managing your account and understanding how much money you have available to use at all times, you can sidestep overdraft situations – and their fees. Effective account management also sets you up for much easier monthly balancing.
Do I really need to balance my Checking Account each month?
Short answer? Maybe.
Balancing your Checking Account is one of the most sure-fire ways to ensure you’re not making any money mistakes nor that your financial institution has made any errors.
Balancing your Checking Account refers to the act of matching your account records to those of your financial institution.
When you balance your account, you are matching up what your financial institution has provided in your account statement with the information you’ve kept (or should be keeping) about your transactions. This process helps you to see if any reporting errors have been made or if there were any fraudulent charges.
Once upon a time, when checks were the primary form of payment, balancing your Checking Account was critical. Because of the delay in when checks cleared your account, the monthly balancing act kept your records accurate.
Now, though, when debit cards, credit cards, and payment transfer services rule, you may be able to skip the line-by-line act of balancing your account.
If – and this is a big if – you do this:
Invest time in managing your checking account on a daily basis.
When we say time, keep in mind that we’re simply suggesting a few minutes each day reviewing your account, seeing what’s come in, what’s gone out, and what’s still pending. We’re going to look at how to really optimize your account management but to start, just get in the habit of checking your account daily.
How Do I Manage My Checking Account?
You have any number of options when it comes to how you can manage your Checking Account, but we’re going to zero in on two:
- Daily Account Observation
- Money Management Tools
Daily Account Observation
The simplest way to manage your account is get in the habit of logging into your financial institution’s Online Banking or Mobile App. Getting familiar with how your cash flows, when bills come out, and even where you’re spending your money all help you become more in tune with your money.
Daily account observation may seem simple, but it puts you in touch with how much money you have and how you’re using it.
When you log in to your account, check for these three things:
- Watch for your current vs. available balance. Some financial institutions, including MHV, provide two balances for your Checking Account: a current balance and an available balance. Your current balance tells you what’s currently sitting in your Checking Account. Your available balance tells you what’s actually there for you to spend. There may be money in your account that’s already spoken for so you can’t spend it. For example, if you just completed an online transaction, the money may technically still be in your account (and shown in your current balance) but because the transaction is pending, that money is already spent (and thus subtracted to show you your available balance).
- Understand your cash flow. As you get consistent with checking your account daily, you will start to get familiar with your cash flow. You’ll spot when recurring charges and bill payments come out. You’ll start to see a pattern of when money is a little tighter, like at the end of a pay period. And getting a sense for these things will help you start to instinctively manage your account more effectively.
- Take note of where you’re spending money. One of the most eye-opening side effects of getting familiar with your account is finding out where you’re spending your money. You may not even realize that you’re popping into the coffee shop every day, or that you spent $30 in one month on Amazon Prime movie rentals. Checking Account management isn’t just about understanding how much money you have but how you’re using it. And once you’re aware of that you can monitor it more closely.
Do we need a joint account? If you’re in a committed relationship, you may have already had the money talk. Check out our tips on whether you should open a joint checking account or not. Read the Tips
Money Management Tools
Once you’ve gotten a handle on checking in on your account daily, or if you want to dive into something more optimized right away, you can start investigating the various money management apps available to you. There are dozens available for you to pick from, and some are quite good. These tools help you optimize your account management.
But here’s the problem:
By adding an extra app, with an extra step for you to take, and an extra login to remember, you’re setting yourself up for financial derailment. After all, you just got in the habit of checking your account every day, now you have to go to an entirely new app?
If you bank with MHV, you have access to our in-app tool, myMoney Trail. This tool lives within the MHV Mobile App, so there’s no new password, no new download. You can easily click or tap into the tool for a complete overview of your Checking Account.
The best part?
You can aggregate, or add, accounts from almost any other financial institution. Yes, that means that within the MHV Mobile App, you can see a complete view of your financial picture. It doesn’t get easier! Like other money management tools, myMoney Trails offers a variety of features to help you manage not just your Checking Account but your budgets, your spending, even your financial goals.
Let’s take a look at just how powerful money management tools like myMoney Trail can be.
The transaction data feeds from your MHV accounts plus any external accounts you’ve added. This can include credit cards, loans, mortgages, even retirement accounts. It gives you a complete picture of how and where you’re spending money, including an automatic category allocation to make budgeting a breeze.
Everyone knows budgets are a rock-solid method for managing money, but most people also feel incredibly overwhelmed at the thought of building one. With automatic transaction allocations, myMoney Trail builds out an initial version of your budget for you. You simply adjust your budget amounts and categories if needed and allocate any transactions that fell outside of the automation. Budgets are designed using category bubbles that are color-coded to help you stay on track.
You have goals. Maybe building a down payment savings or a rainy day savings. Maybe paying off your credit cards. myMoney Trail lets you build and visualize your goals on a timeline. Adjust your monthly payments towards those goals to see how the change impacts your goal date. Then check in, using the timeline to keep you motivated as you get closer to achievement.
Cash Flow, Trends, and More
Knowing when you’ll have extra funds and when money might be tight will help you effectively manage your account. With myMoney Trail, you’ll get a clear picture of your cash flow, spending trends, and more. Armed with this knowledge, you’ll master not just your account but your entire financial picture.
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The appeal of MHV’s myMoney Trail for members is its convenience: the tool already lives within the MHV Mobile App, giving you instant access to data. If you bank elsewhere, though, remember to research other options. It is likely that your financial institution has a similar tool but if not, a quick Google search will offer plenty of solutions.
The key to managing your Checking Account – and your finances in general – is consistency. Whether you opt to stick with daily account check-ins or go for the full money management experience, you must build the habit of doing so regularly. Once you create that habit, you’ll find your financial awareness, and thus your account management, will help improve your financial health.