I am in awe of people who live on a cash only basis. There are a number of members of DA who do this and, in fact, I think most people in program did so before the advent of debit cards.
I am eternally grateful for debit cards and YNAB, as I am one of the many who find that cash mysteriously disappears, something like one of a pair of socks when you remove them from the dryer.
If I had my way, I would never use cash at all! It literally seems to burn a hole in my pocket. I know others as well who, when reconciling their numbers, inevitably find that their cash is off by a few cents to a few dollars, or more!
Some people have a category called “Lost & Found Money,” which they use to replace money that disappears. I currently have $16.85 in my Lost and Found category. And there have actually been times that I had more cash that I thought.
Now that we have discussed the concept of reconciling, it’s time to go over the steps. You can adapt these steps to work with whatever tool you use to track your spending and income.
Since I use YNAB as my tracking tool, I am going to show you how to reconcile using that software. But the principles are the same for any tracking tool.
I have come across numerous DA members who have never reconciled their income and spending with their bank account. So coming into DA, even though they have a spending plan and a tool for tracking their income and spending, they are vague about the accuracy of their tracking.
Note: The term “transaction” is used to describe any spending or income that occurs in your bank account. Each of these are examples of transactions:
- Spending $125 at the grocery store with a check
- An automatic debit of $1,000 to your mortgage company
- Your paycheck, which is deposited into your checking account
Unless you reconcile your tracking of actual spending and income with transactions in your bank account, there is room for a huge amount of error and vagueness.
Here are just a few examples of what might happen: