Self-Driving Money Waterfall
- Difficulty
- Moderate
- Time to result
- ~ongoing to results
- Steps
- 6
- Confidence
- —
Chris presents an automation model in which money flows through a personalized sequence of priorities instead of requiring repeated manual decisions. The illustrative setup maintains a chosen checking-account balance and automatically moves any excess to the next unmet goal. An emergency fund is completed first, followed by retirement contributions, a child’s education fund, and finally a general investment account. The amounts and accounts are examples rather than universal prescriptions; the reusable mechanism is to define thresholds and rank destinations in advance. Once implemented with a trusted financial service, the waterfall continually directs available cash toward the highest unfinished priority. This reduces decision fatigue and helps turn financial-planning principles into ongoing action.
Origin
Extracted from Deep Dive with Ali Abdaal
How to run it
- 1
Set the checking floor
Choose the amount that should remain available in the checking account for ordinary cash-flow needs.
Pro tip Base the floor on personal spending needs rather than copying the example amount.
Watch out A floor that is too low can create avoidable cash-flow pressure.
- 2
Detect excess cash
Configure the system so money above the checking threshold becomes available for the next priority.
Pro tip Keep the rule simple enough to understand and verify.
Watch out Chris notes that users must trust the provider before allowing broad automation.
- 3
Complete the emergency fund
Direct excess cash to the emergency reserve until its predefined target is reached.
Pro tip Chris’s example uses six months of living expenses.
Watch out The appropriate reserve target depends on the household.
- 4
Fund retirement
Once the emergency target is satisfied, route money toward the selected retirement contribution goal.
Pro tip Define the contribution target before activating the waterfall.
- 5
Fund designated goals
Move the next portion toward a specific objective, such as a child’s college account, until its periodic target is met.
Pro tip Order goals according to personal priorities.
- 6
Invest the remainder
Send money left after all higher-ranked targets to a general investment account.
Pro tip Review the sequence whenever goals or household circumstances change.
Watch out Automation should not prevent periodic review.
In the wild
Chris describes software that could retain $7,000 in checking, sweep any excess into an emergency fund until it held six months of expenses, then fund retirement, contribute a chosen amount to a child’s college account, and finally send the remainder to investments. The system was called autopilot and ran in the background.
→ Financial priorities could be executed automatically without requiring a new transfer decision each time cash accumulated.
Common mistakes
Copying someone else’s thresholds
The transcript’s dollar amounts illustrate the automation; they are not presented as universal targets.
Automating before trust exists
Chris found that people were more willing to automate after developing a relationship with the financial brand.
Leaving priorities undefined
The waterfall needs explicit targets and an order for deciding where each additional dollar goes.
From the transcript
“make sure there's always $7,000 in my checking account and if there's ever more than $7,000 I I want you to First fund my emergency…”
“we called it autopilot it just would run in the background you wouldn't have to do anything”
“automate my entire Financial life so I don't have to think about it move the money to the right place”
From the episode
Simple Hacks To Optimise Your Life - Chris Hutchins (All The Hacks Podcast)