You may be hesitant about trusting your money to a computer -- but there are enough checks and balances in place now, that online banking has become an almost fool-proof way to make your financial life easier. You might have trouble keeping track of your balance when doing everything manually -- forgetting to enter a withdrawal in your checkbook register, or making simple mathematical errors that can lead to an overdrawn account, bounced checks, and a lot of unnecessary fees. When you let the computer do the calculating, you can check your balance night or day to see exactly how much cash you have available.

Online transactions are faster than ones through the ATM network -- instead of having to wait for a paper statement at the end of the month to reconcile your accounts, you can watch transactions clear as you make them. Copies of your checks are available for you to view and print any time, without digging through old files in your attic or paying the bank a "research fee" (those poor "canceled-check-box" manufacturers had better find something else to sell) -- and you will instantly cut down on the amount of paper you have to deal with by receiving statements electronically. You can transfer money form one account to another or re-order checks without a trip across town -- and even if you're in bed sick or stuck at work on a weekend or out of the country, you can manage all of your accounts (including investments, retirement funds, and CDs) from any computer. You have 24/7 access to information that even a teller at your local branch can't easily pull up for you -- and whenever you need to ask a question about a transaction, customer service is just a mouse-click away, 365 days a year (no more "banker's hours" or having to leave work early so you can take care of your financial business before they close!)

Plus, online banking allows you to do what everyone should do and few people actually do -- track your spending. Most folks go through life working and shopping and paying the bills, without ever really being aware of where their money goes. Do you keep a budget? Probably not. Why? Because it's a pain in the neck to enter EVERY transaction into a computer program each month so you can tally your expenses. But if you get in the habit of running expenses through either your credit card or your bank account, it's easy to see where your money goes.  Start by downloading a year's worth of expenses (into Quicken, Quickbooks, or even just a spreadsheet) and organizing them into the major categories of expense in your life -- food, clothing, household supplies, auto, insurance, entertainment, medical, whatever. Tally up your costs for each category and divide by 12 -- that's how much you spent on average per month in the last year. But is that a reasonable amount? Take a good hard look at your monthly paycheck and determine how much you can AFFORD to spend on each. With every monthly download, you can compare that to what you ACTUALLY spend -- it's the only way to really know whether or not you're overstepping your financial bounds. I personally have a hard time with cash, it just slips through my fingers and I can't recall what I bought -- so I've gotten in the habit of putting every possible expense on our credit card, then of course paying the bill in full. This gives me a thorough accounting of our spending each month -- every restaurant meal, every impulse buy, every soda or snack at the gas station is staring me in the face when I do my bookkeeping, and I find it much easier to recognize those areas where we need to cut back a bit. Some credit cards and banking services even offer a budgeting/analysis feature through your online account -- they'll do the tallying for you!

Next week, I'll discuss online bill-pay -- including the system I set up for my client to keep track of his monthly payments clearing...

read the original post of this blog