How to Reconcile A Bank Statement – 5 Easy Steps

by Neal Frankle, CFP ®

Reconciling your bank account each month is step #1 for  you if you really want to be successful financially.  That’s because your bank statement tells you how much you spend.  If you don’t know how much you spend each month it won’t matter how much you save or invest because if your spending is out of control, it will eventually devour all your money.  That’s a sour taste.   So your spending is key, and your bank reconciliation is the key to your spending.  Pretty straight-forward.  Right?

Now, don’t worry if you don’t know how to reconcile your bank statement.  You’re not alone. Many people at all levels of financial sophistication and capacity are clueless when it comes to reconciling their bank account.

Even though I knew how to do it, I used to ignore reconciling my accounts because I was “too busy”. Years ago my wife and I decided to have one joint checking account. So we just kept enough money in the checking account to make sure we didn’t get overdrawn and that was the end of it. This was many years ago and it was short-sighted.  We didn’t know where our money was going and as a result couldn’t focus our financial energy where our priorities were.

If you take a few minutes now to learn how to do it and then become willing to practice – and even make mistakes – you’ll soon find out:

  • It isn’t hard to reconcile your bank accounts
  • When you do this monthly you gain insights into your financial behaviors that are simply unavailable any other way
  • It’s an empowering experience that translates into having more control over other facets of your financial life.

With so much to gain from such a straight-forward task, let me make a promise to you. If you are willing to commit to this process (and learn as you go) I’m willing to go along with you for the ride. If you have questions about reconciling your accounts, just shoot me an email and I’ll either answer you straight away or write another post to address your concerns. Fair enough?

First things first.

Understand what we are doing and why. When you reconcile your bank statement you are taking the numbers the bank provides every month and comparing them to the totals you have in your check register. (Your check register is what you have at the back of your check book where you write down all the checks you wrote and the deposits you made during the month.) Simplisimo.

Why reconcile your bank statement?

Let’s get together on what your reconciled balance means. Then you’ll clearly see why it’s important to reconcile your bank statement with your register. Your month-end bank balance is a derived from:

  1. Your previous balance at the end of last month.
  2. Plus all deposits you made into the account during the month and any interest your bank paid you.
  3. Less all withdrawals by auto debit, the checks you wrote or cash you withdrew.

When you reconcile your statement with the register, you are making sure that you have recorded all the deposits and withdrawals. You are also making sure that the bank didn’t make a mistake and that you didn’t pay someone the wrong amount or pay them twice. You’ll also know if someone hasn’t cashed a check you sent. This is to say nothing of having your finger on the pulse of how much you spend. That’s a lot of important information. Wouldn’t you agree?

While we are on the subject of banking, check out Everbank. This is a great online bank that is extremely inexpensive and easy to use. They also have great resources to help you reconcile your account and get on top of all your finances.

When you reconcile your account, you will uncover any mistakes and that could be crucial in helping you run a tighter financial ship. Believe it or not, I’ve seen more than one Pilgrim get out of debt and start building wealth because she started reconciling her accounts. No lie.

Take a look at a simple example.


Let’s say you start the month with a balance of $100. Your bank statement indicates that you deposited a total of $500 into the account during the month, withdrew and or wrote checks for a total of $350 and have a month-end balance of $250.

But when you do your reconciliation, you find that your register shows a balance of $350. Why the $100 discrepancy?

Let’s assume that you are sure that you balanced your account last month and that your starting balance in the register matches with the bank statement. Therefore, you know that either:

  • You spent more than you recorded.
  • You deposited less than you recorded.
  • Someone is dipping his /her hand into the cookie jar.
  • The bank withdrew too much in error.
  • The bank didn’t record a deposit you made.

Regardless of why your numbers don’t match, you can see that it’s important to uncover any of these problems that may exist. This is why it is absolutely critical to reconcile your bank statement every month.

With such crucial information to be had, nobody has an excuse to overlook reconciling their bank accounts each month. Let’s get to work.

What do you need to reconcile your bank account?

1. Your bank statement

2. The records you keep showing all deposits and withdrawals into the account. This is your register. You can keep a written register like the one as the back of your bank book as I said above or an electronic register using a software package. It doesn’t matter. All that matters is that you do record deposits and withdrawals as you make them into your account. Without creating and maintaining a register, it will impossible to reconcile your accounts. Sad…

Enough hot air.Now that you are thoroughly convinced of how important this process is, let’s go through my simple 5-step process to reconcile your bank statement with your register.

1. Does the beginning balance on your register and the bank statement (as of the statement date) match?reconcil1

If the opening balances don’t match, go back to the last time they did match and run the rest of this process. You must reconcile each period on a month-by-month basis.

2. Are all the deposits that are listed on the bank statement recorded in your register?

Go through and check off all the deposits you see listed on the bank statement and make sure they are in your register. Did you forget to record a deposit? If so, enter it into your register and add it to your balance.

3. Are all deposits in your register listed on the bank statement?

Go through and check off each deposit listed in your register to make sure the money got deposited and is reflected on your bank statement. If you have a deposit that isn’t reflected on the statement that means a deposit never got to the bank. Investigate this immediately by calling the bank or checking to see if possibly the deposit was received by the bank after the cut-off date of the reconciliation bank statement.

4. Are all withdrawals on the bank statement reflected in the register?

Go through each check on the bank statement. Are they all recorded in your register? If not, record it now and deduct the amount from your balance. If there are any bank charges, record those now as well.

5. Are all withdrawals from your register reflected in the bank statement?

If not, that means a check wasn’t cashed for some reason (or it was cashed after the statement date). Either way, find out.

That’s all there is to it. This process will take you about 20 minutes a month at most and over time it will be faster. That’s because you’ll keep a tight grip on your register and the process will sail along. If you have fewer checking accounts you’ll have less work to do. That’s why I recommend that you consolidate and eliminate needless accounts if at all possible.

By doing this, you’ll have a much better handle on your finances and as I said, there really is no other way to really have this kind of understanding without doing the reconciliation. This is why I’m such a huge fan.

Do you reconcile your bank statement? If so, what other benefits do you see? If not, are you going to start now? If not, why not?


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{ 2 comments… read them below or add one }

Tushar @ Everything Finance October 24, 2012 at 9:21 PM

It’s so important to pay special attention to doing things like reconciling a bank account. Not many of us do it though, because (let’s face it) it’s not the most interesting task and there are always other things on our radar. It’s incredibly important in the scheme of things. How can we claim to be good with our money if we don’t know where it’s going?


Neal Frankle October 24, 2012 at 10:11 PM

That’s a fascinating and intriguing comment. And it probably explains why some of us struggle financially. I think it was Winston Churchill who said,”Small leaks sink large ships”. Thanks Tushar. Great thought sir.


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