Your bank sends you a statement each month. It might come in the mail, or you might get it electronically. While it might be tempting to overlook it or to simply toss it out with the junk mail, that would be a big mistake. Your bank statement is your bank's monthly response to the old "Jerry Maguire" demand to 'Show me the money!' It contains a wealth of information about how you spend and how you save that you can use to more effectively manage your finances.
Acts as a Spending Record
Your bank statement provides a diary of your spending habits, particularly if you use checks, debit cards or credit cards as your payment method of choice. Your bank statement tells you where you spent your money, when you spent your money and how much money you spent. If you want to create a budget, but don't know how much money to put into each expense category, your bank statement can be a great resource.
Reveals Account Activity
Your bank statement offers a wealth of information. It tells you how much money you had in each account at the beginning of the accounting period, how much money was in the account at the end of the period, how much you deposited and how much you withdrew. The statement lists any interest it has credited to your accounts. It also details all of the fees and charges the bank has debited from your accounts, so you know how much it costs you to maintain your account.
Allows for Account Reconciliation
One of the primary purposes of your bank statement is to provide a means of reconciling your check register. This process involves comparing your records to the bank's records to make sure they match. It is important to reconcile your bank statement because if you think you have more money in your account than the bank is showing, you risk spending your money than you have available, which can result in costly overdrafts or an embarrassing declined transaction at the register. Reconciling your bank statement will also reveal any unexpected or unauthorized charges to your account.
Shows Unauthorized Expenditures
Your bank statement might include your savings account, checking account or credit card accounts. These accounts might be combined on a single statement or they might be reported individually. If one of your accounts has been compromised, for example, someone has gained access to your credit card number. Chances are, the first time you will be aware of it is when you notice unauthorized charges against your account. You can minimize the damage by reporting these charges as soon as possible.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.