Knowledge is power, according to the old saying, and that rings true when it comes to reading and understanding bank statements. Our quick guide to understanding where you and your money stand can help you set yourself up now, and in the future. It’s all part of increasing your financial literacy.
That said, if you’ve had challenges with money, the idea of delving into your finances can be overwhelming. Sometimes, it feels easier to avoid looking at your bank balance and credit statements and bury your bills unopened in a drawer.
It can be especially difficult if you’ve experienced trauma around money in the past, such as being in a financially abusive relationship. It’s easy to feel you have no control and a sense of hopelessness around your money, especially if you’ve ended up in debt through no fault of your own.
But, as the speaker and researcher Brene Brown says, shame can only grow in the dark. When you face your issues head-on — no matter how ‘bad’ they may seem — it can provide control and a sense of relief. The place to start with your finances is reading and understanding bank statements. It’s a small action that can kickstart you to greatness, putting you in the driver’s seat of your finances.
So, how do you read and understand your bank statements to understand what’s going on with your money.
Locate your bank statements
The first step for going through your bank statements is to find and download them. While this will depend on which bank you’re with, you can normally access this in your online, mobile, tablet and desktop banking, as well as get it sent to you by post. If you’re still in or have recently come out of a financially abusive situation, it can be safest to access eStatements virtually rather than having paper statements mailed to your address. You can choose how you want to receive your statements in your internet banking.
Read and understand bank statements
Typically, your statements cover a monthly period, although in some you will be able to select a custom statement period. If you bank with Westpac, you can view and print up to seven years of bank statements.
1) To view a particular statement, select the account and date range.
2) Select ‘download PDF’ to view the statement and save to your computer or other device.
Tip: to get a good feel for your current financial situation, look at your past three months of statements (a quarter). Below is an example of what the statement may show.
The first thing to do when you open your bank statement is to look at the section at the top (see the highlighted example above). This will give you your net financial position. Here, in this example, you’ll see:
- Opening Balance: The total amount of funds you had in the account at the start of the statement period;
- Total Credits: The total amount of funds deposited into your account during that statement period;
- Total Debits: The total amount of funds that left your account during that statement period (ie. withdrawals and transactions);
- Closing Balance: The total amount of funds that were in your account at the end of the statement period.
Compare your Opening Balance and Closing Balance
To get a snapshot of your overall spending and savings habits – cashflow – compare your Opening and Closing Balances. It’s also important to compare your Total Credits with your Total Debits (particularly if you’re using a credit card). If the Total Debits are higher than the Total Credits, you’re probably spending more than you earn and may need to tweak your spending habits.
Check your account details
At the top of your bank statement, you’ll typically also see your account details and information. This includes information like the name of account holders and the type of account. While this may seem boring, it can be important if you’ve recently come out of a financially abusive situation. You will be able to see who is still listed on the account, so you can take action to liberate yourself by getting a new, separate account. You can also see the postal address connected to the account and arrange to get this changed if necessary. This can be done online or in a branch.
If you have a credit card or other loan, you may also see information about your credit terms. This can be a great opportunity to re-familiarise yourself with the interest rates attached to your credit card account (so you don’t end up in further debt if you fail to make repayments) and see if there’s potential to get a more competitive rate.
Get a handle on your spending habits
Next, it’s time to get into the nitty-gritty of your bank statement. While this may seem a bit confronting, it’s important to be able to identify habits that may be limiting your financial potential. At this stage, it can be a good idea to print out your statements and get out some highlighters in different colours, to help you categorise transactions. As you go through your bank statements, you’ll normally see five columns:
1) Date: When the transaction occurred
2) Transaction description/particulars: The name of the vendor and sometimes, the time it occurred
3) Debit: How much left the account if it was a transaction
4) Credit: How much money entered the account if it was a deposit
5) Balance: The total amount of funds in the account after the transaction or deposit
Keep an eye on the Debit column. It can be a good idea to use your highlighters to separate your transactions into incidental spending (buying coffee, clothes, etc.), set expenses (rent, mortgage, car insurance, etc.) and recurring expenses (gym membership and any other subscriptions, such as internet, phone.) This is a useful way to get a better idea of where your money is going. If you find you’re overspending in certain categories, you can tweak your budget accordingly.
It’s also a good opportunity to keep an eye out for any expenses you may want to cancel – like unused subscriptions or memberships. You can also check for any vendor names or transactions you don’t recognise and query these with your bank — which is particularly important if you have recently left a financially abusive relationship, as it could be a sign your ex still has unauthorised access to the account.
Check for fees
While you’re going through your statement with a fine-tooth comb, it’s also a good idea to look out for any fees. This may appear on your statement as an honour fee, international transaction fee or credit interest fee.
While these charges may seem small, they can easily add up to hundreds of dollars over the course of a few months. So, identifying these and checking whether they are absolutely necessary can be one way to free up some more funds in your account.
Scouring your bank statements may not seem like the most exciting way to spend an evening, but it’s an important step towards financial empowerment. We hope this quick guide makes the process a little less painful and potentially even enjoyable.
Things to look out for
Abuse through bank descriptors. Here’s how the bank is combatting a form of financial abuse where people use bank descriptors to send abusive and threatening messages to people. Lisa Pogonoski Westpac’s General Manager, Customer Solutions, explains.
“Around two years ago a disturbing form of abuse was uncovered involving a digital banking feature. The feature had been put in place to benefit customers but was being used in abusive ways.
“… the ability to include messages with up to 280 characters to enhance a payment’s remittance information – enabled users to use transactions to send inappropriate messages to their victims.
“Perpetrators were making low value transactions – often as little as 1c – and using the descriptor area to contact their victims.
“In January this year, we switched on new technology to block this. Since then, more than 6000 payments made by Westpac and St.George customers have been blocked, in real-time, and the customer notified, because they included a message with words deemed inappropriate or offensive. Many of these instances were not financial abuse but some were.
“Recently, we took another major step, enabling customers who receive an abusive message to report it to us by clicking a report button, alerting a dedicated team.
“The onus is on us to be constantly vigilant to new behaviours and abuse of new technologies. People should feel safe and spared from abuse and we’re up for making that happen.”
If you or someone you know is experiencing violence or abuse, please contact 1800 RESPECT.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.