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Haunted By Your Financial History? Here's How to Move Past It

Don’t let the financial mistakes you’ve made in the past haunt you forever. Follow this guide to recover from an imperfect financial history and build a better future.

October 21, 2021

Personal financial management can be a challenging and stressful aspect of modern American life. Due to a general lack of financial education in our country, many young people make mistakes early on that can haunt them for years.

However, no financial hole is so deep you can’t get out of it. Whether you have a habit of overspending, carry around burdensome debt, or suffer from a bad credit score, you can move past your financial history. Here are some financial tips to help you get started.

1. Track your spending

One of the common reasons people wind up in financial trouble is that they tend to overspend. The human aversion to delaying gratification and our consumerist culture both push people to spend money when they get it instead of saving it for the future.

The first step in turning this around is to track your spending. Figure out where each dollar goes on a monthly and annual basis. Include everything from your rent to your coffee.

Consider plugging your bank accounts into complimentary software like Mint and making purchases with a debit or credit card to make it easier. Keep it up for a month or two until you can estimate spending for the rest of the year.

Don’t worry about making changes at this point. Just focus on tracking everything down.

2. Build a budget and stick to it

Budgeting is one of the fundamental financial skills. If you don’t know how to spend your money intentionally, you won’t be able to save, pay off debt, build your credit or invest.

Fortunately, knowing where your money is going is half the battle. You’ll likely find a surprising amount of waste you can eliminate immediately and painlessly.

For example, maybe that gym you signed up for before the pandemic started charging you again without telling you, even though you haven’t been back. Call customer service, cancel your membership, and tell them you want a refund.

Of course, these easy cuts probably aren’t going to be the only ones you need to make. After the initial round of cuts, focus on getting the following expenses under control:

  • Housing: rent or mortgage payments

  • Transportation: gas, insurance, and maintenance for your car

  • Food: restaurants and alcohol 

These three are the biggest line items in many American budgets, and they can sink you if you let them. However, if you can get them to a reasonable level, you’ll have much more room for other expenses.

Note that there’s no objectively correct budgeting method. Just make sure you set a goal for your spending that is achievable and sustainable while still reaching your savings goals — and stick to it.

3. Follow a debt repayment strategy

Once you have your spending under control and a budget in place, you should have more monthly cash flow to direct toward your debts.

There are two popular approaches to paying off large amounts of debt: 

  • Let’s start with the debt avalanche method. First, you make all the minimum payments on your current debt. Then, figure out which account has the highest interest rate and put all the cash you have left for debt service toward that account until it’s gone.

  • Next is the debt snowball method. You may have heard the famous Dave Ramsey praising it before. Just like the debt avalanche method, you’ll want to keep making all your minimum monthly payments on time. That should be your priority - it’ll protect your credit. Next, figure out which account has the lowest remaining balance and put all your spare cash toward it until you pay it off.

Both of these methods work. The important part is staying consistent. However, if you want to save as much money as possible, it’s wise to use the avalanche method. Paying off the account with the highest interest makes the most sense mathematically.

If you’d prefer to have an early psychological win and build momentum, you can use the snowball method. You’ll eliminate an account faster that way.

Note that if any accounts carry an interest rate that’s equal to or greater than the return you can reasonably expect from investments, consider putting all of your cash toward paying it off before investing. Try not to let things like credit card debt linger any longer than necessary.

4. Learn the credit system and rebuild your score

People who carry high debt balances and struggle to keep up with their payments are also likely to have a low credit score for two reasons: 

  • First, your payment history is worth 35% of your FICO score. It accounts for how consistently you pay your debts on time and in full. 

  • Second, your outstanding debt balances account for 30% of your FICO score. Generally, the higher they are, the more your credit will suffer.

While that can be frustrating to someone who’s struggling with debt, it’s good news if you’ve managed to rein in your spending, build a budget and start paying off your accounts. That alone will address 65% of your score.

The remaining factors in your credit score are as follows:

  • Length of your credit history: 15%

  • Diversity of your credit accounts: 10%

  • New credit activities and number of hard inquiries: 10%

It’s important to understand how these come together to build a good credit score. Consider pulling your credit report to help you create a game plan. You can get a complimentary copy from

5. Consider a financial therapist

Learning the steps to recovering from poor financial decision making is simple, but following through with them can be more difficult than you might expect. 

Personal finance is just that — personal. Bad financial habits can break up marriages, cause low self-esteem and get passed down from parents to their children. Sometimes, it takes more than logic or willpower to overcome these habits.

If you’ve struggled to move past your financial history before, consider working with a financial therapist. These experts combine the expertise of a counselor with that of a financial advisor. They can help you move past any personal roadblocks you may have.

If you want to get out of credit card debt once and for all, consider using Tally† to potentially make the journey easier. You can manage all your payments from one convenient dashboard. 

​​†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.