From Debt to Financial Freedom with Adam Carroll

From Debt to Financial Freedom with Adam Carroll Episode Cover Image

“There is a story that we are told, and that we have been sold, I think, over time, that you’ll always have a mortgage. I’ll always have student loan debt. I’ll always have a credit card. That is a story that we adopted as our own. The distinction I like to make is whoever we heard that from, our parents, our grandparents, peers, that may be their truth, but it’s not the truth because the truth is you could be out of it if you want it to be.” 

~Adam Carroll

Meet Adam Carroll

Adam Carroll is a renowned financial literacy expert, celebrated author, and captivating speaker who has delivered over a 1,000 speaking engagements worldwide. With his thought-provoking TED talks, which have amassed over 6 million views on YouTube, Adam has become a prominent figure in the field of finance. His groundbreaking documentary, “Broke, Busted & Disgusted,” aired on CNBC and continues to be screened in numerous high schools and colleges nationwide, inspiring young minds to take control of their financial futures.

In this Episode...

Do you know the actual cost of long-term debts like mortgages and student loans? Linzy’s guest Adam Carroll works with college students to teach financial literacy skills, and he works with people in all life stages to help them reconsider how to view and manage long-term debts.

Adam shares that these long-term debts, such as mortgages, ongoing credit card debt, and student loans, can be handled in a drastically different way that can free up tremendous amounts of money by paying off the debt quickly. Adam illuminates the way that debt can prevent financial freedom, and he talks with Linzy about how managing those long-term debts differently can profoundly change people’s lives. Adam teaches this approach within the program he founded called The Shred Method. 

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At the end, you’ll be invited to join Money Skills for Therapists and get Linzy’s support in getting your finances finally working for you. Click here to find a Masterclass time that works for you!

Episode Transcript

[00:00:00] Adam: There is a story that we are told, and that we have been sold, I think, over time, that you’ll always have a mortgage. I’ll always have student loan debt. I’ll always have a credit card. That is a story that we adopted as our own. The distinction I like to make is whoever we heard that from, our parents, our grandparents, peers, that may be their truth, but it’s not the truth because the truth is you could be out of it if you wanted it to be.

[00:00:28] Linzy: Welcome to the Money Skills for Therapists podcast, where we answer this question: how can therapists and health practitioners go from money, shame and confusion to feeling calm and confident about their finances and get money really working for them in both their private practice and their lives? I’m your host, Linzy Bonham, therapist turned money coach, and creator of the course Money Skills for Therapists.

[00:00:49] Hello and welcome back to the podcast. So today’s podcast guest is Adam Carroll.

[00:00:54] Adam is a renowned financial literacy expert. He’s a celebrated author and a speaker who’s delivered more than a thousand speaking engagements worldwide. He has a thought provoking Ted talk, which has amassed more than 6 million views on YouTube. So, you know, he’s been seen a few times. He’s become a prominent figure in the field of finance.

[00:01:14] He’s got a documentary called Broke, Busted, and Disgusted, which aired on CNBC and continues to be screened in high schools and colleges nationwide, inspiring young minds to take control of their future finances. As you can hear from his bio, Adam has, been around the block. And today Adam and I get into talking about strategy for debt repayment.

[00:01:36] We talk about how debt, especially things like our student loans and our mortgages, that we just get very comfortable with, can end up costing us more than double what we have borrowed over the course of our lifetime, what becomes possible when we do prioritize paying down debt, and something that Adam and I talk about quite a bit is balancing that taking care of yourself, which, you know, I always talk about on this podcast.

[00:01:59] You know, we don’t want you to be paying down debt at the cost of your own well being. Balancing those needs and taking care of yourself with that. using money strategically. So this isn’t about paying down as much as possible, and like really putting yourself out, and putting yourself into an unsustainable plan to pay down debt, which I see students do sometimes in Money Skills for Therapists.

[00:02:22] I see folks like when you just want to get rid of your debt so badly that you’re like putting all of your extra money into the debt, but then your furnace breaks and suddenly you need to put money back on the debt to pay for the furnace. That can be really defeating. What Adam talks about today is a strategy that he has that’s about taking extra money and using it really strategically, so that you can be paying down kind of the principal on your debts, and actually make those big debts that we can just learn to live with and be defeated around, make them go away. Here’s my conversation with Adam Carroll.

[00:03:08] Linzy: So, Adam, welcome to the podcast. Yes.

[00:03:10] Adam: Thank you so much, Linzy. I’m excited to be with you because I love this topic. And I’m just excited to see where our

[00:03:16] Linzy: I know, I think we should have been recording our preamble that we were just chatting in advance. It’s like, we should have really recorded that. There’s so much there, in terms of, similarities between how we, we think about money and, you know, the kind of, ways that we’re helping folks approach it.

[00:03:28] So Adam, for the folks who are listening, give us an introduction. Tell us about who you are and what you do.

[00:03:35] Adam: Yeah. I would say the easiest way to describe who I am is I’m a financial educator, and I have been for the past two decades. I like to tell people, Linzy, that I’ve been talking about money before talking about money was sexy. I started candidly because my wife and I, when we first got married, decided we were going to live on one income and blast away all of our debt with the other income.

[00:03:56] It took us about 24 months to do it, but we’ve lived relatively debt free ever since then. And I started teaching sort of the principles and methodologies we used on college campuses all across the country. And that led to two Ted Talks, a documentary on student loan debt, and then eventually creating a piece of software that is essentially a great cashflow management tool that we promote now called The Shred Method.

[00:04:21] Linzy: I love that trajectory. It makes me really excited that you’re talking to college students. I know something that, folks in my audience talk about, therapists and health practitioners, is there’s just such a lack of financial education, you know, that we all come up with, and with therapists and health practitioners that tends to compound then with all these other things around the way that our profession does talk about money,

[00:04:41] if it ever talks about money in our, professional education. We’re certainly not encouraged to think about our own financial wellbeing or think about any kind of strategy. We’re taught nothing about business, but also everybody… I’m in Canada, you’re in the United States, North America, I’m sure we could generalize far beyond North America… We just don’t get practical financial education, period.

[00:05:01] So it makes me happy to hear that you’re hitting kids at the college level, because at least they’re not fully adults yet. What do you notice that’s like to start to talk to college age kids about money?

[00:05:13] Adam: First of all, it changed my strategies and methodologies on how I raise my own kids around money. Having talked to 18 to 24 year olds that were like, “Well, I don’t know.” You know, I’d ask them, “How much debt will you have?” “Don’t know.” “How much does it cost to get into the dining center?”

[00:05:29] “I’m not really sure.” You know, it was like this whole four year, five year, six year realm where money was so abstract and really not even present for most of those kids because they’re using a credit card that maybe is tied to mom and dad’s bill. They’re using their, u-bill to swipe things. So it goes on a,invoice that they see one time a year.

[00:05:49] And then they just sign away their life on a student loan that pays for that. So, what did I learn? I learned that I wanted to teach my kids, and hopefully that parents everywhere are teaching their kids younger and younger about money, because I was seeing 18 year olds that were completely separated from the money decisions they were making, and this is two full decades for most people where habits are formed and relationship to money is cemented. And, you know, by the time you’re 22 and you’ve created really terrible spending habits or saving or investing habits, it’s hard to break those, right, in your twenties and thirties.

[00:06:26] And I think it goes back to your comment about even the therapists out there that have been in school for eight or 10 or 12 years. And then you get out and you’re like, Oh gosh. And I have to charge 150 or two, two and a quarter an hour just to make ends meet for the 40 patient load that I’m seeing a week.

[00:06:44] Then there’s also emotion tied behind that. so I think deep down, I started out with tactical stuff. What do I want to teach them tactically? And then I realized pretty quickly that there’s like over a hundred emotions tied to money. And what I was really teaching people was what is your emotional connection?

[00:07:02] And how can we understand your emotional connection to money? Cause you have to understand your mindset and your emotions before I can teach you tactics that could be used effectively.

[00:07:11] Linzy: Absolutely. This is exactly what I have found in my own experience with teaching therapists. So, you know, my core course is Money Skills for Therapists. I’ve been teaching for five years. And when I first started teaching that course, all of the emotional intelligence is baked in because I’m there. But what I realized is, we needed to really pause, like the first conversation needs to be about whatever you want to call it: money stories, mindset, trauma, right?

[00:07:34] There is real money trauma that people experience with like not having enough, or money being a point of emotional explosion or violence in a family, right? And like, those things are so, so important to address. And I think we often want to go around them because it’s not fun. They’re not fun things to be with.

[00:07:50] It’s not fun things to say out loud or to name. But what I found is you, you can’t go around it. You have to go through it. Because if our brain is caught up in these trauma responses, these intense emotions, if we’re in a state of overwhelm, you just can’t learn. Your learning brain is not online.

[00:08:07] Adam: A hundred percent. A hundred percent. And I think, in addition to that, when you start looking intently at what did you experience as a kid, and I’d shared this with you pre roll on the interview here… but I just presented to a group of young beginning and small farmers in the Midwest. And one of the stories that they shared was…

[00:08:26] When I asked, what did you hear growing up? Somebody said, you don’t need that. And I heard it about a thousand times. Every time we went into a store, you don’t need that. You don’t need that. You don’t need that. And, and I’ve noticed that there are two paths that people will go down. And one, generally speaking, one path is they’ll go, well, I’m just going to deny myself the finer things.

[00:08:46] Cause there are things I don’t need and I’m going to deny my wants because I was never allowed to have my wants as a kid. I just, I was just told I don’t need it. And then the other path that some will go down is when I’m making a living, when I’m making my own money, I’m going to buy whatever the heck I want.

[00:09:00] And then they end up with significant debt, and closets full of junk that they have no idea why they bought. But it’s to prove a point that they can do it because there were things they were told they don’t need. And they’re like, but I want it. So I’m going to get it. The deep dive is really important because I’ve met people who are like, I have no idea why I’m compelled to buy this crap.

[00:09:21] And then we dig in and I go, that may be why. You’re trying to validate the fact that you had desires as a kid that were never… they were never fulfilled.

[00:09:29] Linzy: Yeah. And what I hear there is it’s the default is either we submit to the story. We make it our story. I can’t, I can’t afford that. I don’t need that. Or we rebel against the story, and we go to the opposite extreme and something that always occurs to me when I hear that is either way the story is running us, right?

[00:09:46] We have a relationship that is being defined by that story. And so, yeah, it’s only when you go through it and you either just identify it and are able to discard it naturally or sometimes we do need to do therapy for it, like do trauma processing, like really dig into it so that it’s just not even a reference point.

[00:10:03] Adam: Right? Because otherwise, it is running your relationship to money. No doubt. yeah, as an example, my earliest money memory, my dad would often give us, my sister and I, a 20 bill on vacation and say, this is for snacks or for a souvenir in the store or whatever it might be. And we were on the Santa Cruz beach boardwalk in California. And I remember my six year old grubby, sweaty little hands kept pulling that 20 bill out of my pocket, and feeling it, and touching it.

[00:10:30] And you know, when you’re six, 20 bucks feels like a million dollars, particularly in the eighties. And so I’m holding that 20 bill. And at some point I flipped. The 20 bill out of my pocket. And what I was told by my sister was, “You are so careless with money. How could you be so careless with money?”

[00:10:46] And that was the story that I carried for a long time. I’m careless with money. And it led me to being a college graduate with 30, 000 in student loans and eight grand in credit card debt. And I was upside down in my car, and I would pop for drinks with my friends when we went out, you know, because I was careless with money.

[00:11:04] That’s just what I did. It’s who I was.

[00:11:06] Linzy: Those identity stories, and that’s something that I, noticed through working with therapists, too, is like, there are stories that… Even a small experience like that, like you’re talking about an interaction with your sister that was seconds long, her making that comment.

[00:11:18] And what I’m hearing is you were so excited and valued the money so much. That’s why you were kind of messing with it in your pocket. Right? It’s almost the opposite, but it became who you were in your own mind. And then you do the things that are who you are. You have the behaviors that fit the person you are.

[00:11:32] Adam: Exactly.

[00:11:34] Linzy: So I’m really curious to hear your story. Cause what I’m hearing is, you know, you accumulated this debt. You had this story that you weren’t good with money, but then you and your wife took this really intentional approach to… Can I use the word eradicating debt? It sounds, it sounds, yeah, yeah, yeah.

[00:11:48] Which is like, not usually my speed. I will, I will say like, folks who listen to the podcast are going to know, like, I’m a moderate. I’m all about balance. But I’m hearing that like, you really made this your project as a couple. So I’m curious, like, yeah, tell me about that. Tell me about the method that you’ve developed that came out of that.

[00:12:03] Adam: Yeah, I think it might help, Linzy, if I share the two sort of core philosophies that we were living by while we did this. And I think it’s really important for people to understand both of these as you go down this process, if debt elimination or eradication is your goal. Number one is that the two single greatest expenses that we will ever have in our life are taxes and the interest expense on debt.

[00:12:28] Those are the two greatest expenses. Most people will spend 60 percent of their working years paying for taxes and the interest expense on the debt that they’ve accrued. So this is mortgage debt, student loan debt, credit card debt, car loans, all of it.And so knowing that, I read this statistic, and I thought, okay, I need to get really good at minimizing taxes, and I need to get really good at minimizing the interest expense on debt.

[00:12:53] And how do I do that? And there’s two ways. You minimize the interest rate, or you blast away the debt, you get rid of the balance as fast as possible. And that led me down a path of understanding amortization tables and how debt is charged, and all those kinds of things, which is very eye opening for people who don’t know.

[00:13:11] But the second core philosophy… and this was shared, and I think it was Jim Rohn, who was known as America’s foremost business philosopher. He passed away a decade ago, but Jim Rohn used to say that if you do for two years what most people won’t do, you can do for the rest of your life what most people can’t do.

[00:13:29] And I love that idea so much. And I thought 24 months, any of us can do for 24 months, something that will then lead to this life that we all desire. And so 24 months was what my wife and I set as a goal and said, what can we accomplish in those 24 months? And we knocked out 55, 000 in high interest debt between student loans, consumer debt, car loans, et cetera.

[00:13:54] And by the end of that period, we were 26 years of age. We had an extra three to four grand a month in discretionary income. And at 26, when you have 50, 000 a year extra, again, you feel like a multimillionaire. So the next step is, okay, how do we grow this wealth? And in the process of doing that, I just wanted to go teach other people what we did

[00:14:16] cause it wasn’t that complicated, you know? It wasn’t easy, but it was very simple.

[00:14:22] Linzy: Yeah, yeah. And that’s what I hear. You know, it makes me think about, funny enough, it’s making me think about Kimmy Schmidt. Did you ever watch that sitcom?

[00:14:30] Adam: Yeah. Yeah.

[00:14:30] Linzy: I haven’t watched it in years, but there is kind of this storyline in it where she has to turn this crank or something in the bunker so that they have power.

[00:14:38] And she has this mantra for herself, which is like, you can do anything for five minutes. You can do anything for five minutes. And that’s what I’m hearing here. It’s like, for 24 months, if you know that there’s an end, you really pushed yourselves and you did it knowing that there was a purpose and an end point there.

[00:14:53] Adam: Yes. And realistically, the reason we were doing it was for the emotional feeling of being free from all of those bills and debts. And so, you know, even for the therapists listening or, a medical practitioner that’s listening to this, one of the questions that I often ask our clients is what will it feel like when you fill in the blank, when you have 10, 000 in the bank, when you have your student loans paid off, when you

[00:15:19] no longer have a mortgage payment? What would that feel like? And if I can get people tied into the emotional feeling of that, I can usually get them off the dime and start changing behavior. because they’re tied to that feeling, not the, Oh God, another bill or, you know, I’m afraid of how much this is going to cost kind of thing.

[00:15:38] And so the way we did that, from a motivation standpoint, was we had all of our debts listed on our refrigerator and we had a big red magic marker that was attached to a string and a magnet and it was affixed to the refrigerator itself. And as soon as we’d blast away a debt, we celebrated and we crossed out that debt.

[00:15:58] And the running joke was that, yeah, we were buying… it was two buck Chuck at the time. Now it’s three buck Chuck. This is like $2 wine at Trader Joe’s, you know? And we would splurge and we’d go buy a $12 bottle of wine and we get excited because we had paid off one of the debts, you know? Okay. We had six $12 bottles of wine in two, in two years that what were our celebration points if we got this knocked out. And I can honestly say that those 24 months were pivotal in us setting ourselves up for where we are today,

[00:16:31] which is, you know, certainly more freedom and flexibility and the realization that retirement and what retirement looks like is a certainty. It’s not an uncertainty. And I think that’s what most people are at some point they’re somewhat concerned about.

[00:16:44] Linzy: Absolutely. Yeah, I would say most people is accurate. And you know, something that’s occurring to me as you’re talking about this, cause I’m like, okay, I’m about to turn 40, big year for me turning 40. So I passed the 26, and I wasn’t with my partner when I turned 26, right? Like we didn’t meet till I was 29.

[00:16:58] Now we’re in that project of like, we have a child, you know, we’re focusing on him a lot. We’re very focused on our community. I am turning my backyard into a cool eco paradise. So it’s like, I have these other kinds of projects. So, a curiosity that I have is, you know, what do you suggest to somebody who’s in a position like mine where it’s like, I do have other projects that are also feeling really important.

[00:17:18] How do I determine how important it is to save myself what I’m hearing is a huge amount of money over a long period of time that we’re kind of protected from, right? Like these debts… the way that they do it, they make it kind of opaque where you’re not able to really realize how much you’re paying for it.

[00:17:32] So I’m hearing there’s like this great payoff that could come down the road if I really focus. But also I’ve kind of missed those years of just like ramen and $3 wine.

[00:17:42] Adam: Yeah. Yeah. I hear you completely. And I’m sure that your listeners are dealing with folks who are in that mode, right? They’re 40, 50, 60. How do I change this? Number one, and this is central to both The Shred Method working, but I think just in general, people’s lives working well, is that if you are not able to save 10 or 20 percent of what you make,

[00:18:05] you are spending too much or not making enough. Period. End of story. And, you know, from a college student perspective, what I always told them was, you have to have more money at the end of your month. You cannot have more month at the end of your money.

[00:18:20] Linzy: That’s good.

[00:18:21] Adam: And so for adults, part of the challenge is we get in the mode of, I have my job, I have my things, I have desires, I can finance these things.

[00:18:31] And we begin to payment ourselves into a corner because we can afford the payments. And so the more payments we afford, the more debt we accrue, and then you’ll wake up one day and be like, Well, now I’m stuck because I’ve painted myself into this corner, paymented myself into this corner, and I don’t have enough discretionary income to get out of it.

[00:18:50] And that’s really what we teach people with The Shred Method is the debts are, you know, they’re important to note. But what we really focus on at the beginning is how much discretionary income is there at the end of the month? Is it 200? Is it 500? Is it 2000, 5, 000, whatever that number is. What you’re doing with that amount of money is what is central to you achieving what you want to achieve later on in life.

[00:19:16] So if there’s 200, it means your shred tool is just a little bit smaller. It’s like a tabletop. You can put one sheet in the shredder, but if you’ve got 500 or a thousand or 2, 000 a month, it is mind blowing how fast debt can be eliminated and the ability to go spend money on the eco paradise. Is that what you call it?

[00:19:37] Which is really cool. I’m going to look this up after we’re done.

[00:19:40] Linzy: Might not be a thing. I might have made it up. But it’s a lot of trees. Yeah, just making a forest in our yard.

[00:19:47] Adam: Trademark it. Buy the domain. I think there’s a million dollar idea there.

[00:19:50] But you can do those things in the midst of using shred, because what we’re suggesting is not the beans and rice, rice and beans, you know, mentality. It’s no, we’re just going to tell you how to be more strategic and efficient with the money that you have.

[00:20:09] Because candidly, Linzy, one of the things we found is that when people have money sitting in a savings or a checking account, and I’m going to point blank, ask you if you don’t mind, I would assume from time to time you have money sitting in a checking or a savings account that sits there for days or weeks or months on end.

[00:20:27] Is that accurate?

[00:20:28] Linzy: Yep.

[00:20:29] Adam: And when you have it there, how does it make you feel?

[00:20:32] Linzy: It feels like a cushion, like security.

[00:20:35] Adam: Yeah. Security. And sometimes if there’s an abundance of security, what might you do?

[00:20:40] Linzy: Spend it.

[00:20:42] Adam: Where?

[00:20:42] Linzy: Where would I spend it? Travel. I’d spend it on travel. I’m still getting my revenge travel in from COVID cause I also had a kid in COVID, so I’m, I’m slower getting my revenge travel in. Travel, backyard, trees, taking care of our home, kind of catching up… I’ve got some catch up tasks and there’s probably like 20, 000 of catch up tasks that I could do from this time we’ve been building a business and, and having a baby.

[00:21:03] So those are like easy places to spend without question.

[00:21:07] Adam: Yeah. So it’s funny because your answers are very experiential and sort of life affirming for your environment and things like that. What some people will do is, I have security, I have an abundance of security sitting in this account. I’m going to go to Target cause it makes me feel good.

[00:21:22] Or I’m going to go, you know… I’m at Costco. Oh, a bounce house. Wouldn’t that be fun at $600. I can have it.

[00:21:28] Linzy: The impulse spending.

[00:21:30] Adam: Yeah. And we do it, and then we may second guess it. We may not, but at some level they are not necessarily things that are getting us to where we want to go potentially, but in the moment we have it, so we might as well spend it.

[00:21:44] And what The Shred Method and our users, what we call Shredders, will do is we begin to sort of minimize what we’re seeing available. Because it limits how much we’re actually spending on things that are frivolous and unnecessary. And instead, what we do is in a short amount of time, usually somewhere between 18 and 36 months, we’ve gotten to a point where there’s very, very little interest cost on debt.

[00:22:09] Cause there’s either no more debt, or we leverage a couple of strategies that super minimize the amount of interest you pay. And then imagine what it would be like to have 15 or 20 or 30, 000 extra a year to go do the kind of things that you described.

[00:22:25] Linzy: Then you’re also doing it, not at your own cost, right? Because there’s that cost of borrowing, and interestingly, Adam, like I find a lot of folks that I work with, they have guilt and shame. The heavy debt is consumer debt. They feel bad about the credit card.

[00:22:39] Right? But things like mortgages and student debt, which like, as a Canadian, I look at American student debt and I’m like, Oh my God, are you guys okay? That’s how it feels because, you know, the debt that folks accumulate, you know, especially to get into the professions that you know, listeners are, are in like psychology, like a PhD in psychology, you know, like you’re talking about more than a hundred thousand dollars of debt.

[00:22:58] And that can just start to feel like a fact of life, right? The consumer debt they feel bad about because it’s in their face. And you know, that it’s Amazon purchases that you probably shouldn’t have made. And there’s other weight to that, but it’s the student loans and the mortgage that can just feel like: this is the rest of my life.

[00:23:12] And I’ve had students say that to me in my course, like, “I’m just going to die with this debt.” You know, what do you say to folks around that: mortgages, student loans, that kind of pervasive long term debt?

[00:23:23] Adam: There is a story that we are told and that we have been sold, I think, over time that you’ll always have a mortgage. I’ll always have student loan debt. I’ll always have a credit card. I’ll always have. And that, that is a story. That we adopted, to use your language. We adopted it as our own. And, and I think that, the distinction I like to make is, whoever we heard that from our parents, our grandparents, peers, whoever it may have been, that may be their truth, but it’s not the truth because the truth is you could be out of it if you wanted it to be.

[00:23:58] And the reality of the truth is that the interest expense on that debt, particularly student loan debt… so let’s separate for a moment, those that went for a psychology degree, have PhDs. And my cousin’s in this boat; he’s got 140, 000 in student loans. He’s 44. He graduated 20 years ago or 18 years ago, and had 130 when he graduated and it’s now ballooned to 140, despite him making 100, 000 in payments over the last X number of years.

[00:24:30] So what I tell people who are in that situation is, you are trying to run a marathon with a backpack full of bricks. And it’s really hard to do, maybe not the first few years, but you’ll get five, 10, 15, 20 years in, and you’re like this backpack sucks. I don’t want to carry this anymore. And by that point in time, you’ve paid so much in interest that if we had just tackled it on the front end, You’d be, you’d knock out the one 40 and you’d walk away and be good.

[00:24:59] It requires some discipline, but it also requires the knowledge that it can be done, and it can be done in short order. You just have to be taught a way to do it. And unfortunately, the only way that it’s been shared is make your minimum payment. Hopefully Uncle Joe is going to forgive the debt at some point.

[00:25:18] And I hear this all the time. Uncle Joe being Joe Biden.

[00:25:20] Linzy: Oh, okay. Yep. Got it. 

[00:25:23] Adam: And, it’s not going to happen. We’re not going to have all of the loans written off en masse. So if you have them, let’s figure out the strategy and go after them and knock them out really quick. And The Shred Method is one way to do that.

[00:25:37] It requires sort of a rewiring of how those payments are made, but it’s lightning fast. I mean, unbelievably efficient when you dig into how it works.

[00:25:48] Linzy: Yeah. And I think that, it sounds great. I’m like, sign me up. Do you work with Canadians? But you know, I think a really important distinction, that listeners might not be super aware of because, you know, we don’t tend to be folks who’ve dug into the financial world, is that distinction between principal and the interest.

[00:26:02] Right? And like, I think, you know, you, you were saying, you know, we inherit those stories of like, you’re always gonna have debt. Also, you know, there’s multi billion dollar companies that make multi billion dollars from all of us being very comfortable and complacent with having certain types of debt. And I don’t think, for folks who are, for listening, I know you’re, we’re all balancing many things. I’m not saying that I think this is the most important thing in life, but what I am hearing is like, if this is important to us, there are ways that we can change this. It’s not an inevitability that we have to pay, you know, and I am curious, Adam, I don’t know if you have any kind of numbers that you could share, but you mentioned like 60 percent of the money that we spend is going to be on debt.

[00:26:42] If somebody has a mortgage, mortgages can seem quite innocuous, innocent, sweet, even. Our mortgage rate, interest rate in Canada for a while was so ridiculously low. all these folks during COVID bought these huge overpriced houses, not even huge houses, huge price tag houses.because the interest rate was so low, it seemed like it was almost free money.

[00:27:02] How does that work over time? Like, if I have a 30 year mortgage, what can I be expecting to pay in interest rates on the purchase that I made?

[00:27:11] Adam: It does make a big difference on what the interest rate is, obviously, Linzy. So there’s a good rule of thumb and that is if you remember,all of your listeners, if you remember 6. 6 percent. At 6. 6%, if you borrowed, say 300, 000 or 500, 000 for your mortgage, you would pay a million on 500, 000.

[00:27:31] So you’re going to double whatever you pay at 6 percent.

[00:27:36] So, that’s an important number to note. Now, what happens is, and this is kind of more of a metaphor or analogy of how to understand the mortgage itself, because if I say amortization table, people’s eyes glaze over and they have no idea what, you know, what… I don’t even want to look at it or, you know, I signed that document, I think, when I did my mortgage, but I didn’t pay any attention to it.

[00:27:57] If you look at the payoff of a mortgage over 30 years time, and you set a traffic signal, a traffic light over the top of that, the first 10 years of that mortgage payment are a red light. It’s largely interesting, with very little principal. You’re not really getting anywhere in the first 10 years. The second 10 years are yellow light, meaning a little bit more is going to principal every single month, but a little bit could be five or 10 or 20, not a ton.

[00:28:25] By the last 10 years, you’re paying a majority of the principal off.

[00:28:29] Linzy: Right.

[00:28:30] Adam: What that means is for anyone that’s going to live in a house for five to seven years, you’re in red light the entire five to seven years. So the majority of your payments going to interest.

[00:28:41] And again, we’ve been sold this story that, Oh, it’s good. You can write off that interest, and it’s good for your taxes and et cetera, et cetera. In the States, in 2017, the tax code was changed, and you get a standard deduction no matter what of 25,900 for a couple. So 25,900 gets withdrawn off your taxes as a standard deduction. If you have a mortgage or you don’t have a mortgage, right?

[00:29:08] So my logic was if they’re going to give me that deduction anyway, and I can get rid of the 20, 000 or 25, 000 that I’m spending in interest a year, why would I not do that? Cause I’m still, I’m still money ahead. So you’re right in the sense that it is very opaque in how we pay this. Cause it’s like, it’s my house, my house payment is X, and I’m comfortable with that.

[00:29:32] But what if there is a strategy that would help you get your house payment down to a third of what it is today? Would you be interested in how to do that? Just to make life easier.

[00:29:42] Linzy: Yeah. Yeah. Yeah. And it really is, I think the length of those loans is where the danger is, right? Cause they make it painless, you know? And so it’s like, well, I borrowed 50, but I only have to pay like, you know, 2, 000 a month. Like what it feels like a deal, but it is that… What I’m hearing is it’s that 30 year period that like really the price is spread out over such a long period of time that it doesn’t necessarily feel painful as you’re paying it, but you’re really locked in and you’re giving a little bit over decades. Decades and decades of debt.

[00:30:12] Adam: Absolutely. We are the bank’s compound interest vehicle. We are their profit center. Not to vilify banks or lending institutions at all, because what they do is essential for society to function. But at some level, if you’re okay, seeing 10 or 15 million bank buildings being built every block, like you’re contributing to it.

[00:30:33] Linzy: You own part of that. You own at least one of the lights in that building at that rate.

[00:30:37] Adam: Totally. Totally.

[00:30:38] Linzy: So, I am curious, Adam, The Shred Method. Can you give us a little bit more of a sense of… what are we talking about here? Is it a strategy? Is it software? Is it a tool?

[00:30:48] Is it a community? What is it?

[00:30:50] Adam: Yeah. Great question. It’s a little bit of all of the above. We like to say it’s a course that will teach you exactly what to do, how to do it. It’s information that you’ve not gotten from anywhere else. It is a community of people who are all walking down this path. We call them Shredders. Sometimes we call them freedom fighters because they’re all fighting for their own freedom in the midst of this.

[00:31:10] And then it is a piece of software, and you had mentioned earlier, that you’re You know, build systems smarter than you are. The software is that, so when, when the software is operational, and you’ve got your data in it, it’s texting or emailing you on a day by day or week by week basis saying here are the actions required today, tomorrow, Friday. And some of those might be pay this bill, pay that bill, but then sometimes it’ll say, based on the income you have coming in and the expenses you have going out,

[00:31:40] send a big lump sum payment of X to your student loan or to your mortgage. And what’s happening, kind of behind the scenes, Linzy, is again, not to get super technical, but there’s interest rate arbitrage that’s happening behind all the algorithmic code in the software. So if you’re borrowing 2, 000, let’s say for five days on a line of credit, but then it’s paid back when your income comes in.

[00:32:10] But that 2, 000 is going against your mortgage payment or your student loan payment. What you’re probably doing is accelerating the payoff of that debt by months and months and months, if not years, and saving tens of thousands of dollars in interest

[00:32:24] Linzy: Okay. Yeah. So it’s robots. The robots are on your side. They know all the math that we don’t want to know.

[00:32:31] Adam: That’s right.

[00:32:31] Linzy: Yeah. But what I’m hearing is that it’s going to give you what are actually very complex financial strategies to help you accelerate your debt repayment without you having to learn all these financial strategies yourself and manage them.

[00:32:45] Adam: Totally. That’s exactly it. That’s exactly it. And it’s all based on a super simple question, which would be, If I loaned you a hundred dollars and I charged you 5 in interest to borrow that hundred dollars, but you knew it would save you 2, 000 to apply it the right way. Would you do that?

[00:33:03] Linzy: Yes, of course.

[00:33:04] Adam: Would you pay 5 in simple interest to borrow a hundred today?

[00:33:06] Linzy: Of course. Of course.

[00:33:08] Adam: All day long, right? We do that over and over and over and over again. And what it does, it’ll take a 30 year fixed mortgage down to somewhere between three and five years.

[00:33:18] Linzy: So, Adam, does it work for Canadians?

[00:33:21] Adam: This is a great question. Here is my disclaimer / asterisk answer. We have a number of Canadians in our client list, and the challenge with some of them is the way that mortgages are set up in Canada, where they can tweak the interest, but your payment stays the same and your term stays the same.

[00:33:39] Linzy: Oh, yeah, yeah, yeah. Those trigger rate mortgages. They’re tricky, yes.

[00:33:45] Adam: It’s very tricky because it can become a negatively amortized mortgage. You know, before you know it, meaning you’re paying every month, but the balance keeps growing.

[00:33:53] Linzy: Like your student loans in the United States.

[00:33:55] Adam: That’s exactly right. So it does work, and we have a number of people who are using it, but we want to be really careful when we plug in your information so that we know what kind of mortgage product you’re in.

[00:34:08] And very candidly, we have coaches on The Shred Method side that will say, “Hey, I don’t think this is a good fit for you because of the product you’re in.” So we’re not about cramming everyone in a product that wouldn’t fit for them. But if we get someone and we say, “Hey, you could be out in like three and a half years…”

[00:34:23] Linzy: Mmm hmm.

[00:34:24] Adam: Would that be of interest to you? Those are no brainers.

[00:34:27] Linzy: Well, I will tell you, I’m just a straight variable mortgage. I just ride the wave. Every time the Bank of Canada makes an announcement, I’m like, well, there goes another couple hundred dollars. So, yes, I’m personally intrigued by what you’re talking about. And like something that I will say to listeners is, you know, something that I, I talk about on the podcast quite a bit, is like balancing out…

[00:34:45] What is the cost of paying down a debt, and what is the negative story versus making sure you have money available in your life for something else? And like, I really want to emphasize that piece, for folks who are listening, paying down debt is probably actually not the most important thing in their life.

[00:34:59] But what I’m hearing from you is if we can connect with what becomes possible on the other side of it, it can be a very strategic way to use your money now, if it means you can pay for your kid’s tuition with cash later, but it is about connecting because what I sometimes see with like the FIRE community, like, you know, Financial Independence, Retire Early, is there’s such singular focus on this goal of paid down debt to the detriment of like their own wellbeing, you know, that like ramen for dinner.

[00:35:26] And something that I always say to therapists is like, we actually emotionally can’t afford to do that. Like we need to be well to be able to do the kind of emotional labor that we do or for folks who do like manual health practitioners, just that like caring and taking care of others, and what that demands of your body like we need to be well. But what I’m hearing here from you is like it can be a both and. You’re not telling people to buy the cheapest groceries possible to do this, but you’re saying what is the opportunity that’s already there in the way that your money works, and here’s how you could use that money really strategically to hit these goals and create more financial ease down the road.

[00:35:59] Adam: You nailed it. You nailed it. Yep. Cause it really is not, I’m with you a hundred percent on, the Ramening of lives. Not a good way to live your life. And in fact, debt payoff fatigue is very real. And we tell people that like, you’re going to get in a process where somebody in your house is going to say, I just want to go buy a purse.

[00:36:19] I just want to take a trip. I just want to, and we go, do it. The system accounts for that. Go do that. We don’t want you to deny yourself those kinds of things. And one of the things that I want to mention, Linzy, in relation to the last comment you made is that, you know, we want this, this self care idea to be there, and what we’re not trying to do is totally revolutionize someone’s behavior around how they’re spending on themselves or not.

[00:36:47] It’s more about a question of the difference between available funds and accessible funds. And so we’ve been told and taught by the gurus and the authors out there. We need six to 12 months in the bank at all times. And that number should be very personal and independent for most people, because if you know, if you lost your job, you could go get a job in 60 days.

[00:37:10] Do you need six months or 12 months? Granted, something catastrophic could happen if you want to be prepared for that, kudos, good on ya. But that may not need to be available funds, it might just need to be accessible funds. And accessible could be the equity in your home, it could be, you know, at last ditch, a credit card that’s there for, you know, true emergencies.

[00:37:31] But we have lines of credit, overfunded life insurance policies. There’s all sorts of ways to have accessible money to sort of, assuage the panic and anxiety about, Oh, do I have enough? I don’t have enough.

[00:37:47] Linzy: That’s helpful to hear. I do think, you know, it’s kind of the Dave Ramsey kind of advice of like, yeah, you need to have this money and this is top priority. And, I think for folks too, who, who tend to generally be anxious about the future, feel like the sky might fall, it’s all going to go away.

[00:37:59] People who grew up, you know, without having money, and it’s weird to have money, and they can’t trust it… It is very tempting to kind of stockpile money. But this is something that I talk about with students in Money Skills for Therapists who have this kind of stockpiling behavior is like, is this money actually doing the best job it can do for you?

[00:38:17] Is having 30,000 in your savings account actually making your life better? Is it actually serving you? And so what I’m hearing from you is there’s ways to be strategic about that and still make sure that you have money accessible if you have to not work for a while, but it doesn’t necessarily need to be cash that’s just sitting there as though you’re going to need 30, 000 tomorrow.

[00:38:36] Adam: Tomorrow. Precisely. Yeah. Cause then that’s the big distinction. Available money is, Oh, if you had 30 grand, you could go pull out of the bank or grab from your safe. You know, it was stacked on your bureau every morning. You’d count it and feel good about it.

[00:38:48] Linzy: Your gold bars. Your gold bar collection.

[00:38:51] Adam: Yeah. Right. Then there’s accessible money, which is, it might take you two days, three days to get it in hand, or you could swipe a card and have access to it.

[00:39:00] But where are those pockets of money? I think what most homeowners don’t realize is your home… It could be that, And this is one of strategies we employ, but there is a little known tactic in the mortgage world that if you do make lump sum payments and you pay down your mortgage, you can actually recast your mortgage and get the payment down to a, you know, a crazy number.

[00:39:23] So we have clients that will pay between three and 500 a month for their mortgage payment on a, 000, 4, 000 square foot home. So, and it’s done within maybe 24 months or 36 months. We teach them how to do that. So there are other strategies that we employ and teach in the process. All in the nature of making life easier, making you feel better and more financially secure and confident.

[00:39:46] But to your point, making sure that what is being done is being done efficiently.

[00:39:51] Linzy: Awesome. Very exciting. So, Adam, for folks who are interested in learning more about you, getting more into your world, where can they find you and follow you?

[00:39:59] Adam: Well, my world is largely held on TheShredMethod.Com. That’s where you could go to learn more about what we do and how we do it. And I would encourage anybody out there who is like, “Oh, okay. I’m intrigued. How does this work?” We have a savings calculator on the site that you can do. Two minutes or less.

[00:40:18] It’ll tell you here’s how fast you could be out of debt. Here’s how much you would save. If you’re intrigued by that, jump on a 20 minute call with our team, and we’ll run your numbers, and there’s no obligation or anything for that. But then we have a masterclass that’s about 25 minutes long and it’s me just telling people about The Shred Method and how it works.

[00:40:36] I do have a Ted talk that’s out there that’s got 6 million views. I highly encourage all of the practitioners out there to go watch that because it’s all about a game of monopoly that I played with my children with real cash, and it’s very eye opening about how we function and what money, a financial abstraction, is doing in society today.

[00:40:55] And then you can always find me at AdamCarroll.Info.

[00:40:59] Linzy: Wonderful. Thank you. Thank you so much, Adam, for coming on the podcast today.

[00:41:01] Adam: Thanks for having me, Linzy.

[00:41:18] Linzy: My conversation with Adam really got me thinking about all of the kind of rules, like all the complexity in financial systems that I don’t understand. You probably don’t understand… The way that different interest rates are working on different types of debt that we have, and ways that we can be strategically using those debts and using our money in really specific ways to make debt go away faster.

[00:41:44] That’s it’s something I don’t want to learn about. I don’t think probably most people want to learn about, but it’s neat to hear about a solution that automates that, and that can help you take advantage of these complexities that are built into how money works without you having to actually do the mental work to figure it out.

[00:42:04] And I do love what he says about like, if you have 200 a month extra, then, you know, it might be a longer road, but you can still be using that 200 towards, you know, reducing the interest that you’re going to pay over 10, 20, 30 years. So lots of thought provoking pieces there today on how to strategically use money, to get rid of some debt, not have to live with these things forever and have that money available for other things that are richer and that could help us take care of ourselves in our life.

[00:42:33] I’m definitely curious about what Adam does himself, and I’m personally going to be checking it out. So I’ll let you folks know how that goes.

[00:42:39] You can follow me on Instagram at Money Nuts and Bolts. And if you are noticing your own stories around money, if you’re finding yourself feeling anxious, avoiding money, feel like you’re just getting by only having enough. And even when you make more, it just seems to go away. You are going to want to check out my free mini training, The Secret to Getting Unstuck in Your Finances. As Adam

[00:43:04] and I talked about today, there’s so many stories that we carry into our relationship with money. And it’s only by going through those stories that we’re able to free up our brain to be strategic and learn and really get money working for us. So if you know that you have stories hanging around, if you’re feeling the emotional weight, or even noticing thoughts pop up, this mini training is a great way to start to get you connected with those stories. See what you’re working with, and start to think about how you want to shift them.

[00:43:32] It’s a series of short videos and a worksheet. It’s designed to be something that you really work through step by step, which is always how I teach. And it’s totally free. So you can click on the link in the show notes for The Secret to Getting Unstuck in Your Finances Mini Training.

[00:43:47] Thanks for listening today.

Hi, I'm Linzy

Hi, I'm Linzy

I’m a therapist in private practice, and a the creator of Money Skills for Therapists. I help therapists and health practitioners in private practice feel calm and in control of their finances.

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