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Aug. 3, 2022

110. Shredding Debt and Creating Liquidity with Adam Carroll

110. Shredding Debt and Creating Liquidity with Adam Carroll

Join Mike Cavaggioni with Adam Carroll on the 110th episode of the Average Joe Finances Podcast to share how he paid off his home in record time saving over $180,000 in interest in the process. 

In this episode, you’ll learn:

  • What is the Shred Method?
  • Why people should know about The Shred Method?
  • How does it actually work?
  • Adam’s Book Recommendations.
  • And much more!

About Adam Carroll:
Adam has published four books, produced an award-winning documentary on student loan debt, has a TED talk with over 5.8 million views and helps people achieve true financial freedom in their lives. More than financial freedom, Adam is all about helping people achieve time freedom, relationship freedom, and service freedom.

Adam’s books: 
Winning The Money Game 
30 Days to $1K
Mastery of Money for Students
The Build a Bigger Life Manifesto

Adam’s Documentary: 
Broke, Busted & Disgusted

Adam’s Ted Talk:
When money isn’t real: the $10,000 experiment
The changing economic realities of college

Find Adam Carroll on:
Adam Speaks: http://www.adamspeaks.com
Twitter: https://twitter.com/AdamCarroll
Instagram: https://www.instagram.com/adam.carroll/
YouTube: https://www.youtube.com/c/AdamCarrollSpeaker
Linked In: https://www.linkedin.com/in/adamcarrollspeaks/

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Transcript

Average Joe Finances:

Hey everybody. Welcome back to the Average Joe Finances Podcast. I'm your host, Mike Cavaggioni and today's guest is Adam Carroll with the shred method. I'm super excited to have Adam on the show. I actually got a chance to speak with him at the real estate wealth builders conference and watch his presentation there. This is gonna be a real treat for everybody. I really hope you guys enjoy this one. So Adam, welcome to the show. Mike. Thanks for having me. I'm excited to chat with you and to provide some awesome content for your tribe. Yeah, this is absolutely awesome. I am super excited to talk with you as well, especially to share everything that you're doing and how you got to where you are today. It's, an amazing story. And I really think my audience is gonna appreciate it. So with that being said, Adam, if you could share a little bit about yourself, share your story. How did this all get started for you? Where did the shred method come?

Adam Carroll:

Yeah candidly Mike, I was in the mortgage business for a number of years and I stumbled into the mortgage business because to be perfectly transparent, I got my wife pregnant and I was trying to build a business at the time and she's no, I'm not gonna have two babies at home while you galavant around, try to build a speaking business. And that was the environment that I was in. And a friend of mine called one day and he. Hey man, there are people in the mortgage world wholesaling. So I was a wholesaler for a large mortgage firm and I would go out and I would call on brokers trying to write mortgages for their company. And I was pretty good at it cuz I'm a natural relationship builder and I really enjoyed the industry. But, what hit me in all honesty, Mike was, I was watching broker. Five point people. But it's when they charged five percentage points on a mortgage origination between like yield spread and, origination. So I was watching these people do a $200,000 refi of couples on a fixed income and they would charge 'em $10,000 to do. And I was just sickened by the whole thing. So I got into the mortgage business as a broker, trying to do the right thing. And for three years built what I called the first socially responsible mortgage company in the state that I lived in. And at the time one of my loan officers came to me and he said, There's this piece of software, you have to check out. It helps people eradicate their mortgage and record time. And at the beginning I thought why would I want to do that? My goal was to get refis and purchase money and all of that. And then I realized the power of it. And when I started using it for myself, Mike, I was hooked. And then that was all I wanted to talk about was how to use this, to help build.

Average Joe Finances:

I love that. Absolutely love it. And I'm, a little spoiled, right? Because I got to hear you speak at the conference just hearing you say it all again, just how that all culminated to where it is today. Just the story of how you were trying to build something else up after getting your wife pregnant, and you said, Hey, I gotta do something different, got into the broker business and realized that, Hey, these guys are overcharging people sometimes. And this, yeah. It's not something I wanna be a part of. So I really appreciate your moral compass throughout this whole thing. So it just goes to the, just who you are genuinely as a person. So with that being said if this is something that is so effective and, can really help so many people, why don't more people know about the shred method or I know there's other terms for it, like velocity banking and things like that. So why don't more people know about this?

Adam Carroll:

Yeah. This is a question that comes up whenever I start talking about it and I have a couple of kind of boiler plate answers and I also have a gut feeling of why more people don't know about it. And my boiler plate answers are, it's known as the Australian mortgage. It's known as velocity banking. There's a lot of different names and varieties of how it's done. So it's out there. People don't really go searching for complex mathematical strategies on how to eliminate compound interest. But, the real answer, my gut level answer of why more people don't know about it is, the banking industry is so adept and so strong at marketing that if when, you start to realize what is being sold to the consumer it's hard not to see it. I've made this distinction before. It's like being in the matrix and it's like morphia saying, you can have the red pill and knowledge will be opened under to you, or you can take the blue pill and you'll wake up tomorrow. Nothing ever happened. I took the red pill some time ago. Now when I watch marketing and advertising and people talking about buying things and taking out debt and doing all that, there definitely is good debt and bad debt, but the majority of us have taken on debt that we could eradicate really quickly. We just, we pay no attention to it. And we take it for granted that what the bankers are giving us is the right thing. It's the good thing. It's what we need. And I was sitting with a, shred client last night and she goes, you just see all this differently, don't you? And I said, I do, and I can't unsee it. And once you see it, you won't be able to unsee it.

Average Joe Finances:

Yeah, absolutely. It's, funny cuz the next question I have for you I, think I already know the answer to, because of what you're talking about with how, banks out in market and just the way that they advertise their different products. But I would think that still being able to take out a HELOC is still a product from the bank. So why don't banks advertise this type of strategy?

Adam Carroll:

First of all, to understand the banking system, the bank takes in deposits. And I'm sure your audience knows this in intently, but I'm gonna share it with you. The bank takes in deposits. They loan out those deposits times 10, it's called fractional reserve banking. And so if you put $10,000 into the bank in a savings account, and you've done that under the guise of doing the right thing, cuz you need six to 12 months worth of living expenses in the bank. The banker is taking your 10 grand and going and loaning out a hundred thousand dollars. At somewhere between five at this 0.5% and 25%, if it's a credit card and they're making money hand over a fist on the money that you have just sitting there in, in a savings account. Meanwhile, you have a long compound interest mortgage, you have a five to seven year car note, you have a credit card that most people make minimum payments on, so it's stretched out long into the future. And so what the bank has done very adeptly is they've said, just hold onto this. Just keep it this, you don't have to pay it off, just hold onto it for long term. The interest rate is so low. Why would you ever pay it off? And yet the interest rate is not what's at stake here. It's the balance that interest is charged on that is at stake. So someone who says to me this is the cheapest money I'll ever have. My 2.7, 5% mortgage. And I go, yeah, probably really good deal. Like you got a great interest rate, but it's on $700,000. So there's still money that's being charged against this. And the majority of that money is charged at the beginning of your mortgage. So what if we could turn the tides on that mortgage and how long you're gonna have it and actually get to a point where there's more equity being created sooner. That's the power of this. And that's the thing that most people, they don't realize that the HELOC is used for that or could be used for that.

Average Joe Finances:

Yeah. That's a big thing. One of the things I wrote down as you were talking about that, because as you're describing the interest rates ,oh yeah just hold onto it as long as you can the interest rate's low, right? It's cheap money I wrote down low interest rate because that's what it feels like. You're a rat in the rat race just got caught in the trap right now. You're sitting there just chasing, the cheese, but you can't get to it cuz you're stuck. So yeah. Yeah, no, I love that now. I here's the thing though, like we're sitting here talking about this. I don't think we actually even described what the shred method is yet. So if you could. Share with us. What, is the shred method? How does this work? How do you use this as a, vehicle to, pay down debt or invest or anything like that?

Adam Carroll:

Yeah. So the premise of the shred method is, this Mike, you have a mortgage traditional mortgage that most people take out on a 30 year fixed amortization table. And when most of us buy a home, we're gonna put some amount down, call it five, 10, 20%, whatever it may be. So let's assume you put 20% down on a property. You could go get a home equity line of credit. Against the equity that you now have in that property and for the shred method to work candidly your HELOC needs to be somewhere between one and a half and two times your monthly net take home pay. So if you're taking home five grand a month, Ideally, you would have a HELOCK that's in the 7,500 to $10,000 range. So it's not crazy. You're not taking out a massive, HELOC but what we're gonna do is we're gonna use the HELOC now as our checking account. And when I say we're gonna use that, our use it as our checking account. All of your monthly bills will be paid out that HELOCK and when you get paid every two weeks, your income simply drops in to the HELOC bringing the average daily balance down the software that powers the shred method is based on a number of complex algorithms. But basically what it does is it tells you exactly to the penny, how much to send to your debts. It could be a credit card, car loan, but fundamentally we want to get to the mortgage. And so on a week by week or month by month basis, you'll get a notice notification from the system that will say, based on your income and your expenses send $2,788 and 72 cents to your mortgage today. What most people don't realize is that every time you dump a big lump sum payment in your mortgage, you are accelerating the amortization table. So if you are on payment, one, when you start the shred method by the second or third month, you might be at payment 96. Meaning you've skipped eight years of mortgage payments just by leveraging some of that HELOC against the mortgage. And that in itself is cool. But what's cooler is when you look at what is eight or nine years worth of payments, cost you in interest or save you an interest in this case. And for most people it's literally gonna be like 60 or $70,000 is what they're what's what the savings is.

Average Joe Finances:

Yeah that's, huge. It's huge. Especially when you're thinking about how much you're accelerating your mortgage. So if you are sitting here and you're chunking down your mortgage, will the bank automatically make it so that when your payments are going in, like you're already fast forwarded on your amortization table? So will they say so let's say for example, you have a $500,000 mortgage, right? And you've chunked it down to where you owe 380 and maybe you cut off 10 years of your mortgage. Now, when you make a, regular payment, does that count as like payment number I guess 1 21 going monthly. Yeah. So 1 21.

Adam Carroll:

Yeah. Yep.

Average Joe Finances:

Wow. Okay. And that's, something I wasn't really too sure about myself. Cuz this is something I'm also looking at doing I just recently took outta, he, like we were talking about this before we hit record and I was using it to invest and I still have enough of it left to start chunking down my mortgage. And this was actually one of the methods I wanted to do. And I was talking with my wife about it a lot. So this is very interesting and I think I have a new selling point to share with her that, Hey, as we're chunking down the mortgage, we're also fast forwarding where we are on the amortization table. And I think that'll make her feel a little bit more comfortable. So for those of you listening, and you're looking to explain this in a way that will make maybe your partner or spouse more comfortable, this might be a, good episode to have them listen to if this is something you want to do, okay. Awesome.

Adam Carroll:

Yeah. And one thing I would add to that, Mike, is that, one tweak maybe for your system is that, if you and your wife started pouring income into the HELOC or through the HELOC what you'll notice is it will fluctuate up and down month over month, but it will trend down. So you're gonna blast away your, HELOC faster, allowing you to go deploy more of that money into a syndication or another rental property, or what have you. And the whole time, as you're putting lump sum payments to the mortgage, what you're in effect doing is also expanding the amount of equity that you have available to you. So if you started with the $50,000, HELOC six months in, you may be able to go back to the bank and say, Hey, I've paid off a ton of my mortgage. Could I get 75 or a hundred? And the reason this is really important for people to understand is, this is liquidity. I maintain that most people don't have an income problem. They have a liquidity problem because their income is going into qualified investments that they can't pull the money out of for a long time. Yet when you use this strategy, you'll get to a point pretty quickly where you could write a 50 or a hundred thousand dollars check. And the investments that you can put money in at 50 and a hundred thousand dollars clips are way different than dollar cost averaging into the stock.

Average Joe Finances:

I had to write that one down too. That's a great nugget right there, especially that most people don't have an income problem, they have a liquidity problem. And, I see that cuz even investing in real estate before I had a HELOC the money that I was putting in, like it's something I put into it and I can't touch it. Especially with the syndications that I'm doing. It's limited partner. I put this money in, they take it, they get the asset. I collect the check every month, right? But I cannot say I guess I could if I go and ask them, they could always say no, but I could say, Hey, I want you to buy me outta my position but generally you're not gonna see something like that happen. So this money that I can't touch for the next, like three to five years, Whereas if I put it into the HELOC, sure, I put it in, but I still have more liquidity because as I'm paying it down with the money that I'm getting monthly from the syndication. I'm getting some of that back. I'm getting that liquidity back and I, think that's pretty awesome, cuz that's exactly what I'm doing right now. So I don't even take a profit. From the syndicate, like the, money that I put into a syndication outta my HELOC I don't even take a profit from it. I take the every, piece of the payment and I actually put it right back into the HELOC which is way more than what the monthly payment is for the HELOC for the amount that I borrowed. So that's, actually been a pretty great piece of that. So that's awesome now. With, where we're at today. We're starting to see interest rates are rising and we're seeing a lot of that right now. And by the time this airs who knows what mortgage rates are gonna be. But what do you do if you're in a situation and the interest rates on HELOC start rising? So I know I have a, I have a five year window with the interest rate that I have right now in mine. And then it becomes variable. So I know like at that point, that's, I'm gonna say, I'm gonna go back and say, Hey, I'd like to apply for a new HELOC and, reset this whole thing. But what happens if those rates rise and now I'm going back. And instead of the 4% that I have right now, they say we can give you six and a half or, eight?

Adam Carroll:

Yep. Yeah. Great question and it's actually on the top of people's minds right now, given the interest rate environment and the fed monkeying with rates on a semi-regular basis. The short answer to your question, Mike is we've run the scenarios all the way up to nine or 10%. And it still works. It still saves you money. The difference is that when interest rates are at 4%, we might leverage 30, 40, $50,000 at a time on that HeLOCK and when it's higher 6, 7, 8, 9%, we might ratchet it back to 10 to $15,000 and it will, slow down the payoff of your mortgage just a little bit, but not enough to really notice maybe like 2, 3, 4 months, you're still gonna save a massive amount, tens of thousands of dollars. We're just leveraging a different amount based on the amount of interest that's being charged on it.

Average Joe Finances:

Yeah, fantastic. Cuz the way I'm looking at it is, the difference between the simple daily interest that you're paying versus the amortized interest that you're paying on the mortgage over a 30 year period. So yeah, sure. I think two and a quarter percent mortgage right now. Which is fantastic. I got probably one of the best rates out there when I refinanced, but at the same time, looking at it over a 30 year period. When I make a mortgage payment right now, how much, if it's going to interest versus how much it's going to principle, which actually right now for somehow because I, refinanced, I got two and a quarter and then my APR was 2.26, ever since my first mortgage payment, I was actually making slightly more into the principal than into interest, but I'm, it's still like 50-50. It's maybe like 49-51. And it's, that's a lot of interest that I'm still having to pay. Whereas if I start chunking it down and I, knock 10 years off that mortgage, what a huge difference being at that point. And then fast forward to, to knocking it down to where I'd be at the 20 year mark plus, that's when you really start seeing a big difference, at least when you look at the amortization table.

Adam Carroll:

And you can be there really quickly. So we were chatting about this pretty on the interview, but I'm on my third time, cash out, refinancing my home and paying it off. So in the last nine years, I basically paid my house off two full times and we're on our third time. And this last time I pulled out $200,000 in cash. We invested it in the market and, in real estate and some other deals. My payment is right around $800 a month. So I don't escrow, because the escrow just comes right outta my HELOC so it's that's money. I'd rather not give to the government on a monthly basis. I'll do it twice a year, pay my property taxes and my insurance once a year. But my payments around 800 bucks a month and. The investments that we put the 200 grand in produce about $775 a month in cash flow. So in effect, the investment I made pays the mortgage payment that I borrowed to make those investments. Furthermore, we started shredding. And so within a year, we had paid it down to $95,000 and at 95 grand, my payment is still 800 bucks. But about $200 a month goes to interest and the rest goes to principal. So not only is my investment making 7 75, but the majority of that is going into principal to help continue to blast away the mortgage. And I still have access to all the the money on the HELOC. So, this is a strategy that has multiple facets to it. Some people just wanna blast away debt. We can help you do that. Some people want to control their cash flow. It can help you do that. It's super robust and very fluid.

Average Joe Finances:

Yeah. I absolutely love that. And the second piece of that with what you just shared, besides just using the HELOC as a means to be able to pull out cash when you need it, you were also able to pay off your home and then do a cash out refinance and pull hard money that you can then use to invest in other assets and then do this all over again, then shred it back, down all over again. That's completely fascinating. I absolutely love that. So it's not just because the way I was looking at it was like, oh, I could just, if I need cash, if I need to pull out money to invest, I could just pull out the HELOC. Actually, if I get to the point where my mortgage is low enough, or I paid my house off I could also do a cash out, refinancing, get the actual hard cash in hand besides just pulling it from the, HELOC, so there's more than one way to get, cash out. So absolutely that, yeah, that's fantastic. Okay. Yeah, so that, that kind of settles my mind on the, whole thing too, about interest rates too. If interest rates rise, like there's still a lot to play with here. There's still ways to make this work where it's not really gonna slow you down that much. Now, besides interest rates going up, so here's a scenario, right? I'm retiring from the Navy. My income is about to get cut. My income's about to get shredded, right? When I start going off of my pension and, hopefully VA disability here to the point where I'm gonna lose maybe on, on my personal income, about four grand a month. Now, of course, I'm gonna be going full time as a real estate agent. So I'll be getting my commissions and everything, but let's say in a worst case scenario, I can't sell a home. And now I'm living off of where I was living off of 11,000 a month. Now I'm living off of 7,500 a month. Where does that put me if I'm doing the shred method? So, basically for a loss of income.

Adam Carroll:

There's a question behind the question, which is at 7,500, are you below the watermark or above the watermark in terms of your expenses?

Average Joe Finances:

Yeah I would still be above.

Adam Carroll:

So what it does just can candidly is, it, this is the analogy that I give people. If you've got a significant amount of discretionary income after you pay your expenses that determines the size of the shredder that you have. So people who have 2, 3, 4, $5,000 a month God love you. You have a massive shred. That can, you could put trees through this thing and it'll grind them, right? If you have 1500 to 2000 bucks, you have one of those office, max shredders, you could put 30 or 40 pages through at a time. And it'll shred things. If you have a couple hundred bucks, you've got like a tabletop shredder that you can do two sheets at a time. So what it does is it just slows down the timeframe at which you could be out of debt. It's still effective, it's still gonna save you tens of thousands of dollars. Instead of two to four years payoff time, you're probably looking at five to seven, maybe nine on the very high end, but I, maintain that virtually anyone out there could be completely outta debt between five and seven years, even with a modest income and a modest discretionary income, after paying expense.

Average Joe Finances:

Oh that's, good to hear. And that's probably exactly what my wife needs to hear as well. So I'm gonna make sure she listens to this episode. So love it. I absolutely love this whole method. And that's one of the things I wrote down too, as you were describing that size of the shredder. So what, kind of shredder can I use right now? Do I need to maybe downgrade a little bit after, after I retire? But then again, like I said I'm, gonna keep doing what I'm doing. I'm gonna keep investing and, taking the the cash flow for my investments and, putting it into it as well. So I think I'll be very quickly back to where I was pretirement. Yeah this is good stuff, man. Absolutely loving it. Okay. So we talked about if interest rates rise, we talked about if there's a loss of income now, What about if, and we touched on this a little bit now, what about if somebody says, okay, I don't have too much debt. I'm not too worried about that. I wanna focus on investing. So how can they use the shred method as a strategy to invest? It's what I'm doing right now, a little bit. But I'd like to hear your perspective on that.

Adam Carroll:

Yeah. So when people tell me, Hey, I want to be investing, there's typically two or three questions I'm gonna ask 'em number one is where, do you want to invest? What's exciting to you. And typically they'll say real estate. They'll tell me crypto or they'll tell me equities. They wanna be in the stock market. And what's funny is I get a lot of people that will say, Hey you shouldn't pay off debt, you should be in the stock market because. And then I get the old diatribe about over a hundred years. The S and P is GA it's 10% return and blah, blah, blah. And I don't disagree with any of that. But the advantage of using shred and in particular, a home equity line of credit as your investment tool is the liquidity of it. Number one. So you could write, as I mentioned, a $50,000 check or a hundred thousand dollars check into an investment, and those investments are different. Mike, you're in syndications, most syndications are gonna return somewhere between eight and 14% a year , year over year. If you look at the average over a three or four or five year span, that's what they're gonna return. And if you go in the market, like you're subject to whether or not Elon Musk is gonna tweet about something and have that stock ticker go down, yeah. And, in crypto's been so volatile, and even that being said, my disclaimer is I own a fair amount of crypto, but what I found is that, whenever crypto goes down, I just pull some money outta my HELOC and buy it cuz it's on sale. And the logic behind that for me is it goes back to one of Warren Buffet's idioms, which is " when gold is falling from the skies, you can either go out and collect it in a wheelbarrow. And the fact that you have a HELOC accessible to you is the wheelbarrow because it's some take you back a little bit. You remember in March of 2020, the wheels fell off of society. Vegas closed, and I was like, Vegas closes, what happens to MGM stock? MGM stock went from $42 a share to $7 a share in two weeks. So I said to my wife, Hey, we're gonna own a piece of MGM. So we pull out 10 grand out of the HELOC and drop it on MGM stock at about eight or nine bucks a share after it had bounced. And I was like, this is gonna be awesome. Today it's $36 a share. So that's the power of this, right? When you see a deal, you go scoop it up. Cuz you have access to that capital. And all the while the market was doing this high flying ride and crypto hits 60K and then went back to 45K. Now it's at 30K Bitcoin in particular. What people were telling me. It's dumb to pay off your debt, man, it's dumb. So dumb. You should be in the market. This market's killing it. And I'm like, yeah, the market's killing it, but it's overpriced. And every high has a low and we have to be getting close. So as I was paying off debt, Freeing up equity and being more liquid. Now I'm looking my chops okay, I'm waiting for MGM to go back down and Coca-Cola to go down and Wells Fargo to go down and the whole stock market to go down and crypto Bitcoin at 30 grand a coin, that is on sale. And so you better believe like we're taking money out of the HELOC and putting it into some of those things, because I know that that, I'm not necessarily trying to time the market. But the market timing is right and we have the access to the capital using that HELOC so it's a long winding answer to your question.

Average Joe Finances:

Oh, Hey but it works right. And I, think the most important takeaway from that is not to sit here and try to time the market. But the fact that you have the liquidity, that when an opportunity presents itself, you can snatch it up, you could jump right in. So somebody that's still doing their monthly investments, into whatever stocks or equities that they're trying to invest in. Monthly, you can still do that. But at the same time, if you built up all this liquidity by paying down your mortgage and, having this higher limit now on your HeLOCK that when you see something just completely dropped down, you can snatch it up like what you did with MGM. That's, super fantastic. Super fantastic.

Adam Carroll:

Yeah and, it's an astute observation on your part that, that monthly payment that you're making the dollar cost, average investment into your Roth IRA, or what have you, you can still do that with the shred method. It's not like that's, that has to be stopped. I can show you the software can show you in vivid detail where the Delta between investing in a Roth IRA, that's averaging six or 7% versus blasting away the debt and how much how much you'll save versus how much you might make, where it really matters. Mike. And this having studied this and knowing the fire movement, our goal is to get to a compound interest point on our investments as fast as possible. if you look at the example of a penny that doubles every day for 31 days, it's the last two or three doublings day, 29, 30 and 31 that gets you to 10.2 million or whatever it is. We wanna get there as fast as possible. But when you're dollar cost averaging, that takes a long time, like you're talking 40 years plus of investing to get to the point where those doublings happen. We're doing the opposite of that on shred, where compound interest is working against you on your mortgage. And we want it working for us. So if we shred the mortgage and then accelerate the investment, we get to compound interests on the positive side, that much faster.

Average Joe Finances:

Absolutely. And, I love the analogy that used too , the doubling a penny every day. I actually saw that recently on TikTok. It was pretty funny just cuz the accounts that I follow are all like financial independence and, investing ones. And one came up where it was like, Hey, got a question for you. If I give you a choice between taking a million dollars today, or giving you a penny that doubles itself every single day for the next 30 days, what would you pick? And I thought for a second, I'm like, it gives you like five seconds to think. I'm like, I'll take the penny that doubles every day, because by the time it gets to the end of the month, I was like, I'm gonna be in the millions for sure. Yeah. And sure enough, after 30 days it was like 5.6 million. So what, you said with the 31 days? Of course it'll be 10.2. But that's the beauty of compound interest and the fact that you can get there a little quicker and supercharge what you're doing with a HELOC just makes it all that much more attainable for someone that thinks that they might not be able to get there. Or maybe somebody who's a little bit older that thinks, man, I should have started 20 years ago. There's still opportunity out there for you to do it. For those of you that are listening and not watching this on YouTube, you can't see, I'm actually wearing my fire shirt today, where it says financial independence retire early. I usually like to just cover up the, re part, the retire early, because I don't ever consider myself gonna be retired even after I retire this year. It's hitting that point where I'm financially independent, where my expenses are covered by my passive income. And to me, that is where I want to be. Where I think most people want to be is at that point where you hit that financial independence, and then you can do the things that you wanna do. And the fact that you can use the shred method as a vehicle to get there. A little quicker than you probably thought you could have is also something that I wanna put out there because that's just absolutely awesome. And it's something that I didn't even realize I was trying to do on my own with the HELOC but I'm very interested in your software and using that myself and I'm definitely gonna check that out for myself as well. I'd like to go into something now that we call the final round. And this is where I'm gonna ask you four questions that I ask everybody that comes on the show. So if you're ready to go, these are four hard-hitting questions. I'll hit the go button and we'll get going on it.

Adam Carroll:

Fire away, Mike.

Average Joe Finances:

All right. And even behind you, I see that picture that says set goals and go, so that's what we're gonna do right now.

Adam Carroll:

I love it. Yes.

Average Joe Finances:

So the first question is, what's the biggest mistake you've ever make?

Adam Carroll:

Oh, man. I love this question and I hate this question because I'm a big believer, like we learned from our mistakes. There are lessons learned, so we either win or we grow, we never fail. But I, had a massive failure and that was. A friend of mine and I were talking about investing in real estate. We were completely green. I owned a duplex at the time and that was it. And he's Hey, let's go to this auction. And it was literally like a state auction Sheriff's sale, where you're on the, doorstep of this house and the auctioneer is calling it. And in the moment you're like getting caught up in, I'm gonna get this house and it's gonna be a steal. I was taking everything on hearsay. Someone made some comment about what the value was. I assumed that was gospel truth. And at, the end, like my partner and I had our hand up and no one else did. And at that moment I was like, oh crap, I, we just bought this. And I had told my wife that I was just going to see what it was like, so I come home that day, Mike and I said that auction that I was going to today and my wife got this just devastated look, and she goes, you bought it, didn't you. And I'm telling you, Mike, this was the money pit. We had mold issues. Some of the water pipes had burst. There was a hot tub in a three season porch that they had literally built the porch around the hot tub. So we had to cut it in half of the circular, saw to get it out. And, my lesson really was this. Always, do your due diligence before you buy a property, know what you're getting into, be the most educated person at that auction or in the room, if you're making an offer and have really talented people like realtor Mike on your corner as you're going to, put in offers. But for me, that was the biggest, that was definitely the biggest.

Average Joe Finances:

Wow, Adam that's that one hurt just listening to it. I was sitting here, just gritting my teeth oh it's funny. Cuz you know, recently there was an auction out here for a property that I was actually looking at in Hawaii. And I, told myself, I was like, ah, I'm not, I don't know if I could buy an investment property in Hawaii. It's just so expensive here. And I was like, and I saw this one coming up for auction. In my neighborhood. And I'm like, Ooh, if I can get this one for 830 or less, I think with, because I got being a realtor, I got a chance to go look inside of it and everything and, check it out. I said, easy fixes. Maybe 10 to 20K into this thing. I'll probably be 850 all in and looking at the. The comps in the area. And, I was like, this could easily sell for 959, 60-ish. I think I'd be in a pretty good spot. Anyway come, to the auction day and it actually goes for 949 and I said, woo, glad I did not do that. But the person who got it's probably gonna live in it. I don't think they were. But yeah, as an investor, the whole thing I'm thinking was like, I'm not gonna pay a dime over 830. I'm glad I got, I had a chance to go and take a look at that and, do my due diligence on it. But that's why as you were describing this, I was like oh, what do you get himself into?

Adam Carroll:

So you gotta know your numbers. You have to know your numbers. And I learned it was a valuable lesson. It was a long lesson learned. I think I held that home for four or five years before I finally got rid of it. Wow. Tenant issue after tenant issue. And I drive by it now and I'm like, all right. I learned I learned what I needed to learn from it. And I moved on.

Average Joe Finances:

Awesome. Okay. Next question. This is another heavy hitter. Okay. And, this, these all kind of tie into each other, so you'll, see that. But what is something that you learned that you wish you knew when you first got started?

Adam Carroll:

Oh, man. This, this method, candidly, that nothing has created well faster for me than, knowing how to do this. And I wish I had learned about buying a duplex or a fourplex when I was in my twenties and shred it. If, there are 18 to 25 year olds out there, do yourself a favor, go find a duplex or a fourplex live in one unit, shred the heck out of it. And within three or four years, if you're living on less than you make, you'll have a completely paid for asset that will become the foundation for your wealth building machine. . I so wish I had taken the advice that I give to college students today. Cuz I'd be, not that we're not, we're in the fire movement. I mean we're in coast fire for sure. But it's man, we would've been in a way different scenario.

Average Joe Finances:

Absolutely. Absolutely. Yeah. The best part is because you're talking about how you teach a college teach this method to college students today. That kind of ties in again into the next question. And is do you have any tips or tricks that you would recommend to someone that is just getting started today?

Adam Carroll:

So this, has somewhat to do with what we talked about before and buying the house, but someone that's getting started today, what I would wholeheartedly recommend is finding someone in your close proximity that will mentor and guide you. I have found that mentors and people who have come before you and done it already are more than willing to help you set you on the right path and, I've had a number of tremendous mentors in my life, but if I were getting started right now and I knew that let's say it's real estate that I wanted to be a part of Mike. I would go figure out whether it's bigger pockets or guys like Diego Corzo or whoever it is. I would go find these guys and, have them coach and guide and mentor me. Cuz they're gonna help you avoid so many pitfalls. I think if I'd had the right person in my corner on that house purchase, they'd have been. Hey, don't go above 140, you're gonna get hosed if you do. And, I would've bypassed that and gone to the next home that he would've said here, this is a good one. Do this one. You know what I mean? So bottom line mentors find them, spend time, appreciate them, buy them coffee, buy them dinner, pick their brain. That's my best advice there.

Average Joe Finances:

Yeah, no, I absolutely love that answer because it's one of the things I talk about on this show a lot and, a lot of my guests have come on and said the same thing and besides just a mentor is just that whole networking piece, right? If you go out and you find somebody, you meet people that's, huge. And you could find yourself a great mentor at a local real estate meetup find somebody that you can just have that conversation with and have them in your corner that, that can really make, a big difference in, in your own personal journey. A lot of people think that they might have to do this alone, but you don't this real estate is mostly a team sport. So if you are getting into real estate investing, definitely go meet other people and take on a mentor. So I absolutely love that answer. Okay. Final question of the final round is, do you have a favorite business investing or real estate related book or podcast or both? \ Adam Carroll: So my favorite right now, cause I'm constantly reading and, it feels like I have a rotating bookshelf of favorite books. One has been there and I'll talk about that one kind of the, perpetual book that's on it, but Traction which is a book for small business entrepreneurs, you have it right there doing, there we go. So I love the book Traction. I really love what it's done for my business in terms of creating streamlined efficiencies and systems, and being very clear about expectations for my team, but I'll tell you a book. I'll give you a book that you might not have heard of Mike and the book is called A Happy Pocket Full of Money and it's by a guy named David Cameron Gikandi the secret to this is, I read it at least twice a year. And typically when I'm going on vacation or I'm taking a long trip, I'll pull it out, take it with me and read it. And the book is less about money and more about quantum physics. And it's the idea that like it is our ideas, it is our thoughts, it is our vision, our belief in things happening that will bring them closer to us. And, there's a little bit of think and grow rich in there about having definiteness of purpose and doing one thing and doing it really well. But I read it all the time when I read it from time to time, I should say. I'm reinspired to get super focused and clear on what it is I want because the people who, achieve the most in life are the people who are clearest about what it is they're there to achieve. So somebody who says I'm gonna build a $10,000 passive income. And that's, they're doggedly determined to do it. They'll do it, right? They're super clear on it. So I would highly recommend Traction for Entrepreneurs and A Happy Pocket Full of Money for anyone else. No matter your business, just to get really clear about what you want. Absolutely love that. I'm, definitely gonna look that book up as well, A Happy Pocket Full of Money. That just sounds like a good book to read. My pockets would be happy if they were full of money.

Adam Carroll:

So that's it. It's all about like I am joy. I am I am joy. I am abundance. I'm a money magnet. Those kind of messages. One of the things that I remember from the book, candidly, Mike is, how can you ever enjoy something if you are not enjoy while doing it. And so he says, go find things you enjoy, be enjoy while you do them and watch all the goodness come back to you. So like with real estate, for me in that house, I had to get away from real estate for a time. Cuz I was so frustrated with that house. I was never enjoy while I was there. And then I started realizing I could be enjoy doing a whole lot of other things like I'm enjoy when I'm showing people shred and teaching. 'em how to blast away debt and, invest for the future. And as a result, the business has grown and thrived and I think a byproduct, it is a byproduct of being enjoy.

Average Joe Finances:

That's great. It sounds like a lot of affirmations, right? Positive affirmations that the book just gets you to, really think about that stuff. It's one of the things that I love about, like when I do my daily journaling and, I'm writing down my affirmation for the day. It's just something that as you keep repeating it to yourself and as you keep putting it out there it's, just something that will always be in the back of your mind, whether you're a spiritual person or not. If you repeating something it's always gonna be in the back of your mind. So either way there's still a science to it, because it's gonna be stuck in the back of your head. You are just mentally just putting it there the entire time. So you might not be thinking about it all the time, but it's always there. So yeah, a hundred percent love that. I'm definitely gonna check that book out.

Adam Carroll:

Do you remember Jim Rhon? Yep. Is that name ring bell, Jim Rhon. So he had a saying that, we become what we think about most of the time. And he also had a joke on top of that. He'd say my dad always said, if that were true, by the time I was eight, by the time I was 15, I'd be an 18 year old girl. Unless you hit the rim shot on your sound effects board. And I, truly believe that, like what we think about we bring about. And so to your point, if you're doing affirmations or you're reviewing your goals every morning, You can't help, but not achieve those goals at some level, because you're so focused on making that it's always in your mind day after day.

Average Joe Finances:

Yeah. That's fantastic. Yeah. Hey Adam, this has been absolutely phenomenal. Just everything that you've talked about with the shred method, even to the own lessons that you've learned in real estate as well, and what you've been able to do with this method. The actual joy that you get out of teaching it to others is absolutely awesome. Being able to have a conversation with someone like you, who's genuine and genuinely cares about the products that they put out and being able to actually help other people focus on and achieve their goals is something that I love doing more than anything else. So being able to interview you and have this conversation has actually brought me much joy. So I wanna say thank you so much for that. And now for those that are listening that have enjoyed this episode and enjoy what you're talking about, they're gonna wanna know a little bit more about you and where they can find that information. So if you could please just share where can people find you? Do you have a website any social media profiles that people can follow and we'll make sure we have all that in the show notes as well.

Adam Carroll:

Yeah. Yeah. Wonderful. And thank you for the offer Mike to come on the show. I love what you're doing. I, think the conversational nature of your podcast is awesome. It's super easy to listen to, which is fun. People can find me very simply@theshredmethod.com. We have a prerecorded. Webinar that will teach you everything you need to know about how the method works. And and then we're, actually launching a new site that has copious amounts of what we would call cornerstone content. So you could, you can go down the rabbit hole on the site and read all about it all the different ways that it works and how we built wealth and it helped other people build wealth using the system. So check out theshredmethod.com. I'm on Instagram. It's Adam dot Carroll C A R R O L L. So follow me on Instagram. And then the shred method is also on Instagram. It's the.shredmethod. But those are the primary places.

Average Joe Finances:

All right so fantastic. Like I said, I'm gonna have all these links in the show notes to make it easier for you to either click or just copy and paste. Go follow Adam, go follow The Shred Method, see what they're doing as he continues to just do his own journey here and help other people reach a place where they can become financially independent. That's what we're all about here on average show finances. So Adam, again, much appreciated, really awesome. To have you on the show. I am so thankful and this has been a fantastic conversation. I hope you have a wonderful week and Aloha from Hawaii.

Adam Carroll:

Hey, Aloha, Mahalo my friend. Thank you.

Adam Carroll Profile Photo

Adam Carroll

Author, Speaker, Founder of The Shred Method™

Through the use of The Shred Method™, Adam Carroll paid off his home in record time saving over $180,000 in interest in the process. He’s sharing this strategy with the world in order to help people ‘free themselves to be themselves’. Adam has published four books, produced an award-winning documentary on student loan debt, has a TED talk with over 5.8 million views and helps people achieve true financial freedom in their lives. More than financial freedom, Adam is all about helping people achieve time freedom, relationship freedom, and service freedom.

Adam’s books:
Winning The Money Game
30 Days to $1K
Mastery of Money for Students
The Build a Bigger Life Manifesto

Adam’s Documentary:
Broke, Busted & Disgusted

Adam’s TEDx talk:
When Money Isn’t Real: The $10,000 Experiment