Blending colors in photoshop and illustrator

I am working on a print for my wall and I am trying to create something like this:

^Source

I have already created the letters in Illustrator and now I am adding the colors in Illustrator and then exporting everything to Photoshop and then using the liquify tool to blend the colors to create a similar effect. I also used the healing patch tool to blend in the hard edges.

Is that the right way of doing it? Or is there another way?