Automating Your Finances – Expert Tips From Darius Smith | Ep. 248

Intro/Outro: You know what it is, that’s right. It’s time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It’s the money talk with Tiff podcast.

Tiffany Grant: Hey everyone. I am so excited because I have Darius Smith on the line. Now Darius is someone who’s also in the space with me, but he focuses on something really specific and that’s automation.

And if you all follow the podcast. I say, you know, budget Nirvana at the top of budget Nirvana is automation. Did you know how your money’s flowing? So I’m like, Darius, let’s do a deep dive on automation. Cause we’ve never talked about that on the podcast. So how are you today?

Darius Smith: I’m doing great. How are you doing, Tiffany?

Tiffany Grant: I’m doing awesome. Awesome. So let’s go ahead and jump in. So first of all, when you’re talking about automation. Are you talking about how bills and things are coming out? Let’s just set a baseline for the

Darius Smith: audience. Definitely. Um, there’s levels to automation for sure. Um, and I think how your bills are paid is definitely one of the levels.

Um, I would say it starts off from, I would say probably about that level to putting your bills on auto pay. Um, but it gets. More holistic when you have a complete system. So I, I have a course that I teach is called the automated money system. So pretty much where all of your money comes in, just from you working, you getting a paycheck and all of your money goes out, that can be automated.

Um, It’s not just your bill pay, but it’s also your investments. It’s also your debt pay down, um, and any of your savings that you want to do. And sometimes some of your other goals that you’re also wanting to work towards are all automatically done for you. And more importantly, in the order that you want them to be done so that you don’t leave anything important out.

Tiffany Grant: Awesome. Awesome. So before we jump into that, what if we have an audience member listening? Like, Oh my gosh, automation already going to overdraft. Like how am I supposed to do this? Um, what are some things do you think that they should do automation to or what are your thoughts?

Darius Smith: Yeah, definitely. Um, I think the reason that I set this up is actually because of that reason.

I used to, I used to overdraft and I just couldn’t figure out why, why would I overdraft if I have enough money? I make enough money for how much I spend and it was really a prioritization problem. So I think everybody definitely should. Um, automate, because, um, this is, this is where this is really just organizing your money.

Um, I think automation, the, the real strategy, no, let’s, let’s have a better word. I guess the real benefit of prioritization of automation is organizing your money so that you’re not like, you don’t, you know, where everything is. Um. I think there’s, there’s probably a better way of saying that. But, um, yeah, I think that’s definitely the benefit is, you know, where your money is, um, and it’s not necessarily for people that are rich or have a lot of money is more so for people that.

Need their finances in order.

Tiffany Grant: Yes, I totally get it. You, you definitely explained it. Well, don’t worry about that. So let’s hop into how you fully automate everything. Cause I know that we have some listeners that are not automating anything. So where should they

Darius Smith: start? Definitely. Uh, so first things first is in order to automate your.

Your finances, you have to know where your money is. You have to know where it’s coming from. You have to know what happens to it when you get it, like the instant that you get paid. Meaning like your taxes, your benefits, meaning your 401k, things like whatever you get paid. Where does your money go?

Instantly. And then next after that is your direct deposit. Um, so where’s your money going from there? And then on the other end of it, you need to know where does your money die? Where are you spending it? Where are some of those leaks in your budget that you don’t really know about? Or you probably don’t, you know about them, but you don’t know how severe they are.

Um, so you need to know exactly where your money is. And one of the other activities that I do with people is, uh, finding out where your money has gone over time. So I do a um life a full life, um, where we calculate how much your earnings were over your whole lifetime. And we also calculate your net worth and compare the two numbers.

So that would be the very first activity I would say you do calculate your life earnings, which I can go into how to do that. I actually have a video and stuff on that as well. And then also calculate your net worth, compare those two numbers. You’re. Net worth is generally going to be lower than your life earnings, but you don’t want your, your life earnings to be 500, 000 in your net worth to be negative 50, 000.

It’s a really bad ratio. Um, and then second after that, figure out where your money is going. So get a book or get. You know, spreadsheet out or something and look over the last month of expenses, the last three months of expenses. And I would say at least try to get to at least the last six months of expenses.

Um, if you can do a year, that would be great. It’s a lot of work to do that, but, um, if you can see and put it on paper where your money is going, you can definitely make better decisions with. Um, how you’re going to strategize strategically automate your money.

Tiffany Grant: Yeah, I agree with that. Um, because I’m sure everybody’s experienced where there’s something that you pay for yearly that you completely forget about.

And all of a sudden it just comes out and you’re like, Oh, whoa, that was not in the budget. Um, so definitely that look back is imperative. And just look back as far as you can. I agree with Darius on that one. So once we know our income, you know, maybe we already have a budget or what have you, what’s next?

Like, what should we

Darius Smith: automate first? Yeah. So the, the number one thing that I teach people, and this is something I think I do that no one else does is you need to automate. Your accounts, you need to automate your direct deposits to have a separation of concerns. What I teach people is you have at least three checking accounts and if you’re single, if you’re not sharing money with anybody, you can get away with two.

But if you are sharing money with a spouse or a significant other, um, And if, even if you are single, you want to just be extremely particular, then I would say you need at least three checking accounts. You need to have a bills account. This is a non negotiable sacred account that you don’t touch. Every all the money gets direct deposited into this account.

And you know, exactly to the dollar amount that you need to put in, you’re not doing percentages here and you automate all of your bills coming out. So this would be all of your debt that you’re paying off early. This would be all of your bills, like your rent or your mortgage. This will be your utilities, things.

Things that are non negotiable, you’d also put any subscriptions, things that are reoccurring, and you don’t really get a choice of whether you get to pay it or not. Um, all of these would be in that non negotiable bills account, you know, to the dollar amount, exactly how much needs to go in there. And for everybody that’s very particular, going to have a question.

Yes. You put a little buffer in there and, um, and make sure that you don’t overdraft. And you never do because I set it up correctly with you and you also get a little, that buffer also adds a little bit of a savings over time as well. Second account that you need is, um, your fund money account. You need to make sure that while you’re on this journey, you’re enjoying yourself and you have at least some money to, uh, spend on things that you like.

Um, this could be for one month, me and my wife first started this. We had a whole bunch of debt.

Um, and I think we had like a hundred dollars a month and it was not enough. We didn’t enjoy it, but it was so much better than zero because, um, you know, we were able to sustain this, this journey and not quit. So you need to have some money set aside that you know, you’re going to spend. And if you blow it on something stupid or what other people may deem as stupid, that it’s okay because you got some enjoyment out of it.

Um, The third account is going to be your variable spending account. And this is where the rest of the money goes. So right now, the way that people budget is they just put all their money in one account. And that’s pretty much the rest of the account. So they pay the bills out of there. They pay, um, you know, their variable expenses out of there.

They spend their fun money out of there. But the problem is when you don’t organize or you don’t separate these concerns, um, The order of when you do these things doesn’t always match the prioritization, the priority of them. So you, uh, you might go out and have fun. And you might need to go, you know, to Target and buy whatever you need to buy.

Um, and you know, how Target get the ladies sometimes. You know, they spend a little bit more than they should sometimes. And, uh, by the time your bills come out, you know, you might pay one bill or you might pay two. But then by the third or fourth one, you realize, dang. If I would have been able to know where my account would be today, I might’ve spent less at Target, or I might not have gone to that dinner, or I might’ve just spent less at that dinner.

So, um, by separating these things out, you know exactly how much money you have for each, uh, area of your life. I

Tiffany Grant: love that. I love that. And it kind of reminds me of profit first.

Darius Smith: Let me guess.

So you said that, but go ahead and finish. Cause I have something to say about it.

Tiffany Grant: So I’ve done a few episodes on that. So if you’re interested in learning about profit first for business, go back and listen. Cause we’re not going to go over here. But it kind of sounds similar, um, just on a personal note.

Now, what were you saying? Cause now I’m curious.

Darius Smith: Let me touch on the profit first really quickly. So when I first got started, um, I got into a bunch of debt because of a business that I started. And when that business, I, um, was reading books to try to help me figure out my life and figure out the business finances and profit.

First was one of the books that I read. So I actually made the automated money system based off of fundamentals from two books. The, just the personal finance stuff for, um, um, I’ll teach you to be rich by Ramit Sethi. I love that book. Hold on. And the structures. Let’s

Tiffany Grant: pause real quick. I love that book.

Y’all please read that. Um, if you haven’t done so, I will teach you to be rich. I will have the link in the show notes. I just wanted to pause and say that too. All right, go ahead. Thanks.

Darius Smith: And if you want some inspiration on reading the book, Rameet just came out with a Netflix special, I believe. So maybe you can watch that, get inspired by who he is.

He’s a real cool down earth dude. And then maybe you’ll want to go read his book. Um, the other book is profit first. Now this book helped me figure out how to structure automation. And pretty much that, like, I think you hit it the nail on the head perfectly when you can separate the concerns and make sure the things that are most important are taken out first.

Um, that’s when your automation like really helps you to accomplish any goal that you have. And that’s literally, uh, those two books merged together is how I made like a profit first version of personal finance rather than business finance.

Tiffany Grant: Nice. Nice. So I was, I hit the nail right on the head then. Cause Sounds very similar.

Awesome. Awesome. So I love how you spun that to personal finance though. Cause you know, I’ll be honest. I work with clients all the time and not everybody can do has not everybody can do the whole one account, you know, budgeting thing, you know, where you’re. Making the buckets, but not physically making the buckets.

Um, it’s not for everybody. And so having this as another way that you can budget, cause I mean, essentially that’s what we’re doing still, using this as another way to do it. Um, where it’s a little more clean for some people, I think it’s a really good, um, option to have. So I appreciate you breaking that down.

Are there any. Other tips that you’d like to share with the audience when it comes to automation? Like, um, are there ways to make sure that you stay out of trouble? You know, I heard you say, make sure you have a buffer, but somebody might be listening like, okay, how much should the buffer be?

Darius Smith: Yeah. Um, so the, I have this all built out on like spreadsheets and I’m actually building a tool that’ll make it even easier than spreadsheets, but, um.

I would say use something that you can put this on paper. If you build your own spreadsheet, then that’s great. Um, if you come to me, I can get you a spreadsheet as well, but it has a bunch of different pages and has a lot of different fields that you have to fill in. Pretty much you have to put a lot of input in, but this helps you to decide, um, where your, uh, level of automation is needed, I guess you could say.

Um, so I use a 5%. Um, buffer as of right now, but it’s a, it’s a lever. You can push it up. You can push it down. I wouldn’t go any lower than 2% because at the end of every year, you should probably take some of that money out so that your bills account or your non negotiable account isn’t getting super fat.

And you just have like way too much money in there for no reason because you don’t want money sitting checking accounts. Um, there’s also a couple other things that you need to know. Like there’s more than just what I said in the last five minutes. There’s also like a, um, I use a funds. Um, Um, there’s a sinking funds, uh, I guess strategy in here as well.

So that one time of year payment that we were just talking about, does it come back to haunt you? And you were like, Hey, that wasn’t part of what I, any of these buckets of, you know, accounts that we have, um, you need to definitely account for that. Um, I also mix in Dave Ramsey’s, um, What is the, what is his payoff?

His debt payoff thing called the, uh, baby steps, not the baby steps, but more specifically the, um, I can’t think of the debt payoff one. You can edit this out after, after I think,

Tiffany Grant: um, um, let me see. Uh, Dave Ramsey. The

Darius Smith: snowball. There we

Tiffany Grant: go. Snowball. Okay. All right. Yeah. Can you re say that? Definitely. What you just said so that way we can cut it cleanly.

Darius Smith: Yep. And then I also mix in Dave Ramsey’s snowball method. So, um, it, whenever you’re planning for your debt pay down. I always put these debts in order and then have a single number that you want to pay for for your debt. So if your minimums for your debt all add up to, let’s just say 700 and you commit to paying 800, we’re going to just use that snowball method.

Put that extra hundred towards the least debt and wrap this whole thing into debt costs you 800. And it’s going to be 800 until it’s gone. Um, that’s another little small hint. And I feel like that’s something we would probably need to dig into a little deeper and probably don’t have the time to for now.

But, um, I think those are some of the some of the early things to consider. Um, and then one more last thing is just. A lot of times when you set up your direct deposits with your job, they give you the option to have multiple accounts. You can do percentages or you can do, um, you know, a specific dollar amount for your bills account.

You want a specific dollar amount, like I said, for your, uh, for your fund money account. Um, you probably want a specific dollar amount and you can do a percentage of whatever is left if you’d like, um, but it kind of gets messy once you start getting in pay increases and things like that. So I would do a specific dollar amount and just update your dollar amount every year when you update your system.

Um, and again, the rest goes to your fund money or excuse me, to your variable account. Which is just all the rest of your money. But the one thing that’s not accounted for here is your investments. Put your investments from your job, like your 401k first, and then take all this money out if you’re investing on your own, like an IRA.

You want to make sure that money goes somewhere where it’s prioritized, so you don’t want to just put it in your variable, because one month you might get… A hundred dollars left one month, you might get $700 left, and that’s the only month where you invest. So you probably want to add that to your bills, um, and make sure that you’re actually investing every single month if that’s your goal.

Um, anything else that’s your goal? Like, just make sure that you have an account for, I have people that I work with that’s like, Hey, we’re we wanna buy a house next year, we wanna save up $5,000 the next 12 months. Okay. 12 divided by five. Or was that 500, 5, 000 divided by 12, whatever that number is, make sure every paycheck you’re putting that amount of money into a savings account.

So that’s another place that we’re prioritizing. You don’t have to direct deposit it. You can, you can also just do transfers from your, uh, whatever account that you’re pulling it from. So these are just some of the things that like.

Tiffany Grant: I’m sure it’ll help someone out there that’s like, Ooh, I never thought about doing it this way. I could definitely succeed with this. So I appreciate that. And if people were interested in learning more about you, maybe the program that you have, uh, where could they

Darius Smith: find you? Um, you can go to wealth is my worth.

com. Wealth is my worth. With the TH, I think some people would think I say work, um, wealth is my worth. com. And you can find out, um, a little bit about me. You can also find out about, um, a bunch of the free doc documents that I have, which is pretty much all the spreadsheets that I just talked about. Um, and they’re individual, so they’re not all in one system.

The one system is a paid system. So if you want to get into or enroll in that, Um, I try to make it. Um, economically friendly for everybody. Um, but yeah, just send me a message because I actually have been recently focusing on something. So that is like a system that you’d have to really message me to get into as of right now, cause I’m slowly taking new clients.

I might stop soon. Um, and then. Lastly, it’s just, you can find out about my monthly financial independence, um, workshop that I do every single month as well by just going to the workshop tab on my page.

Tiffany Grant: Awesome. Awesome. And if you didn’t catch all of that, don’t worry because I will have it in the show notes.

So thank you so much, Darius, for coming on the

Darius Smith: show today. No problem. Thank you so much for having me, Tiffany. All right, bye.

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