Stop Mixing Money: Chris Smith Reveals the Financial Mistake Killing Real Estate Investors

Chris Smith (00:00)
I’m in the job of making the invisible visible. Okay, you do that through your budget.

you separate, this is the third point, you separate your personal finances from your business finances. And there, in my words, there’s one line and it’s a one way line, hopefully, from your business finances to your personal and that’s income.

Scott Bursey (01:59)
Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. Today we are strapping in for an absolute master class in taking control of your financial destiny.

We’ve got a guest who is famous for turning confusion into cashflow and transforming complex balance sheets into simple systems. Christopher Smith, the mastermind behind Chaos Free Money is here to inject some serious organizational fuel into your business. If you’re tired of tracking expenses on sticky notes, this episode is going to change your life. Get ready to learn how to build wealth without the headaches. Christopher, welcome to the show.

Chris Smith (02:40)
Thanks, Scott, I appreciate the time. Hey, and by the way, only my mom called me Christopher, so it’s Chris. And it usually had my middle name in there, because she was yelling it out the back door.

Scott Bursey (02:48)
Okay, awesome

Chris, for those of our listeners who may not be familiar with your journey, please tell us how did your career began and what’s your main focus now?

Chris Smith (03:04)
Well, I am actually a lean Six Sigma Master Black Belt, which means I coach and train people on process improvement in industries, all manner of industries, medical, chemical, you name it, it works. And at the same time I was doing that, I found that I could do the same.

on the financial side, on the personal financial side. So guess what? Since 2008, that’s what I’ve been doing vocationally and avocationally is teaching people the principles and then walking with them from where they currently are to where they want to go. So that’s what I’m here to talk about is that personal finance side, which is a very private thing, but

When you get a coach, you can sit down and talk with them and you know they’re not going to share stuff with your neighbors or with your uncle. So ⁓ it kind of brings down that ⁓ concern level a little bit.

Scott Bursey (04:10)
That’s a killer foundation, Chris. Now let’s drill down into your world of chaos free money. What is the biggest often overlooked leverage point that pros can use for immediate financial clarity in their real estate business?

Chris Smith (04:26)
That’s good question. I like that. And it’s one that you didn’t ask me before. But I, ⁓ you know, I think it starts, there’s kind of three big pieces. It starts with goals, okay? Goals in and of themselves only set direction, okay? You string enough goals together and enough ⁓ effort and you get to a destination.

Okay, goals are milestones along this process. Wherever they are, and guess what?

It’s personal, right? You’re not the same as the person sitting beside you on the airplane or at the grocery store. It’s a very personal thing. The second part is you need a vehicle that will move you along those milestones.

that will move you between those goals, if you will, towards your big destination, no matter what that is for you and your family. I call it a spending plan. It used to be called a budget, but people thought the budgets were too constrictive. So guess what? It’s not a budget, it’s a spending plan. You are taking your goals and your business partners, be that a…

non-spousal person or your spouse, and both in the family and in the business, you are laying out how you are going to align the money you have with your goals and directions. And you do it every month in real time. It’s not a once a year exercise, because that’s what accountants do. And Scott, I don’t think you’re an accountant, but.

They’re not in the business of moving people along their goals. They’re in the business of reporting. So we don’t need more reporting. We need more feeling our money. If that makes sense. And the last one, and maybe just as important that I’ve learned over hundreds of clients, is that small business people, whether by design or by happenstance, or they just kind of muddled into it,

they blend their personal and their business finances and it just creates a disaster. Nobody knows where anything’s going. And I have this model, I picked it up from the lean side of Lean Six Sigma is that

I’m in the job of making the invisible visible. Okay, you do that through your budget.

you separate, this is the third point, you separate your personal finances from your business finances. And there, in my words, there’s one line and it’s a one way line, hopefully, from your business finances to your personal and that’s income.

And there’s no other lines. There’s not, you pay this and that’ll pay that. No, there’s one single connection between your personal budget, your personal spending plan and your business. And that’s your income stream, period. Too many people have violated that, not knowingly, typically. And ⁓ it just creates so much tension. ⁓

that sometimes I have to tease apart and reveal, bring it out into the sunshine and they have to deal with the ramifications offline outside of the call. But if you don’t do that, sooner or later, you’re just gonna have to do it, right?

Scott Bursey (09:02)
I love that. What a great breakdown. Chris, in your experience, where do you feel real estate investors most frequently introduce unnecessary, let’s say financial chaos or complexity into their operations?

Chris Smith (09:21)
Well, that is a that is an interesting question, you know, ⁓ I’m still harking back to Not making the business ⁓ Stand on its own not making it have carry its own weight both on the the weight of the expenses but also the weight of the balancing of the expenses with the income and ⁓

⁓ My other gut feel is they sometimes get a little too leveraged or a lot too

to the point where, back to the blending, to the point where their domicile, where they’re them and their family live is at risk. And ⁓ that’s just a recipe for disaster.

I’ve seen it too many times and it is so hard to dig yourself out of that hole.

Scott Bursey (10:59)
It sounds to me, Chris, that it’s a silent killer of passive income. Commingling funds is a huge rookie mistake that even veterans fall into.

Chris Smith (11:13)
Yeah, I think you’re right.

Scott Bursey (11:14)
Chris,

we gotta know, what is one emerging financial technology or simple accounting practice that all investors should be utilizing right now to simplify their life?

Chris Smith (11:27)
Yeah. Well, on the personal side, and probably on a real estate investor side, it would be the same, is that QuickBooks is for accounting. OK, that’s just, that’s my personal view. But you need a program, you need a personal, you need an app that you carry on this little guy that’s always with you.

⁓ And I’ll tell you in a minute why, but it’s always with you and that you feel every dollar that you spend in real time. All right? In real time. That means you, if you’re at home and you’re by groceries, you record it immediately before you leave the parking lot. Same goes for if you’re putting in a new water heater at a place ⁓ that you own that you’re renting out, you record that right away.

Because then you, because typically you’re never sliding credit card or a debit card and you don’t feel it. It’s just like, it’s nothing. Like, sure, yeah, I’ll do it. And. ⁓

think when we, as a world, went away from cash, we lost, because when you run out of cash, there’s no plastic sitting behind it. And so there are apps that will help you do that in real time. And they will work on both, they will probably work, I have not had ⁓ much experience with, I’ve had a few clients, but they will work.

Scott Bursey (12:59)
Yes.

Chris Smith (13:11)
the same program will work on a business. The app that I use doesn’t really ⁓ handle like people that do ⁓ improvement work. Like say you’re putting in a new floor for somebody. And so your pay and your expenses are not aligned, right? So it’s more project work. The app I use really isn’t set up for that kind of.

project kind of stuff.

Scott Bursey (13:43)
Absolutely. And what’s your vision here of your operation? What are some of your goals in the next, let’s say, 12 to 18 months for chaos free money?

Chris Smith (13:54)
Well, ⁓ the ever present, as you know, Scott, ⁓ is to grow that clientele. I get a lot of referral business. Hey, my brother-in-law or my friend next door is in the exact same situation. So I get those, but it’s growing that business. Because in the end, ⁓ my persona

since 2008 has been to be a teacher and a coach for people. And so it’s how can I fulfill my mission at the same time help the most number of people. So the goal is to ramp that up. Now I have in the past year added a second piece that most people…

that I talked with really didn’t take enough time to consider and that’s the whole insurance side. You buy a house, you have a kid, you better have some life insurance, right?

So, and ⁓ while I mostly focus on term insurance, there’s other things out there, but the point is is that ⁓ you gotta have some insurance as a defensive strategy in your life.

You cannot put your spouse at risk. You should not, you can, you should not put your spouse at risk for the loss of your income. And that’s so easy to fix.

Scott Bursey (16:12)
Well said.

and your passion really ⁓ is evident as well for the coaching aspect of things. me ask you this, and I know our listeners are really gonna want to know the answer. If you could walk us through, what single unmanaged factor poses the greatest financial threat to an otherwise sound diversified real estate portfolio in your eyes?

Chris Smith (16:44)
Well, I think it’s the economy, not the underlying economy, but it’s the uncertainty that’s present today. All right? And ⁓ I think there’s some interest rate things in there, but I think it’s just, it feels like when I talk to people that,

they’re not steady on their feet. They don’t believe that what the structure, the regulations, the situation that they’ve been standing in and felt confident that that is a foundation, the foundation’s a little bit unsteady. And they haven’t got their sea legs yet, if you want, if you switch it to a kind of a…

going on a small boat, maybe not a cruise, but on a small boat. Yeah, that floor is not really a floor. It’s just the top of the bottom of the boat, right? And it’s the same there. They feel like they’ve walked off of what they know to uncertain, have no idea when we go out of the bay, is it gonna be two foot waves or six foot waves or calm seas?

Scott Bursey (18:13)
that captain was so well broken down. And what are some, what’s some advice that you could give our listeners over your years of experience over your tenure? What’s some golden nuggets that you could leave with our listeners here today?

Chris Smith (18:31)
Hmm.

Golden nuggets. Well, I it really brings me back to the beginning is that you or you and your spouse got to sit down and go what do we want and Typically, it’s we don’t want what this what’s happening now whether it’s what we have or what we’re doing or the situation that we’re in but ⁓

I typically ask people what’s the three, five and seven or three, five and 10 year goals for you and your family. And then ⁓ you got to out in the open in the full sunlight, build a plan each month that matches your income and your expenses. And guess what? You do that for six months and

you will come to a lot of realizations like, well, why do we have eight streaming services? We don’t need eight streaming services. Why do we go out to eat for $1,500 a month? I don’t know because we can get it now. But now that you can see it, you’re, ooh, no, I don’t wanna do that. And then on the income side, you go, wait a minute.

It’s going to take us a long time to get to our goals if we maintain our current income. So it brings that visibility to where people can use their rational brain and go, I need a different job or I need a different whatever, or I need to lower my expenses for a while to… No matter what that goal is, go on vacation, buy something.

invest, you gotta align the two.

Scott Bursey (20:28)
Absolutely. And that was well broken down as well. Chris, based on these points that we talked about today, what is the key strategic shift a pro needs to make to move from organized to chaos free?

Chris Smith (20:47)
⁓ well, I, you know, it’s, it’s going to be a rinse and repeat of what, of what I just said. You, I think the chaos free comes in when you, when you actually have the freedom, because you’ve built a spending plan. ⁓ Let me step back one more level. Typically people push back when they start talking budgets, and this is on the personal side.

Well, I’m that means I can’t do this or I can’t do that well Spending plan does just the opposite it says all right you can spend a hundred dollars on clothes as an example or on your hobby You know, whatever that my word woodworking I can spend $150 a month without asking permission without having a fight Without having an argument I can spend $150 on woodworking

And so, whew, you move from every single expense precipitates a discussion slash argument into you bring the temperature down and you don’t even blink an eye anymore at those expenses. And so guess what? You have both the energy and the time to work on the stuff that says,

Okay, how do I get my Netflix slash whoever expenses down? I, how do we save more to replace our car? How do we invest more? And so there’s no value added in arguing over things that you can put down and agree to. And that’s.

Now I’m back to process improvement. That’s zero value add to your life.

So let’s work on the things that can add value and that would be that very first line in your spending plan is what’s your next goal? And whether that’s a vacation or a car or investing or sending kids to college, whatever it is, it’s the very first line in your spending plan. And everything else, six months in to a coaching.

obsessions goes that becomes just kind of autopilot Because now we know the rules and We have grace and freedom to break them for a couple months and after that we have to have the hard discussions about intent and But that’s what a coach is there for because they can without guilt or shame I can tell somebody you know

Here’s the deal, humans have an infinite capacity to rationalize whatever they want to do. We can rationalize till the cows come home. And we have to use our spending plan and our thinking brain, not our reptilian brain, to kind of dampen down that rationalization.

Scott Bursey (24:12)
That

is gold. That is pure gold, Chris. Seriously. Pros rewind that last answer a couple times. And Chris, if our listeners would like to reach out, which I know they’re going to want to, or collaborate with you in any fashion, what is the best way for them to reach you?

Chris Smith (24:13)
And it won.

You

I think ⁓ email is the best start. It’s easy because it’s chris, C-H-R-I-S, at chaosfreemoney.com ([email protected]). So no spaces, no underlines, just chaosfreemoney.com. And that’ll get you started. It’s always the first call, the first 30 to 45 minutes, is getting to know each other.

And there’s no cost to that at all, ever. And then we can talk about where you’re going, what you need, how I can provide my experience to, ⁓ to be honest, it’s really to help you speed that process up.

Scott Bursey (25:20)
Chris, thank you so much for joining us today. This has been an absolute master class. Thank you.

Chris Smith (25:30)
You’re welcome. Glad to be here.

Scott Bursey (25:31)
And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ve got a lineup of exceptional guests, just like Chris, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.