More Money Podcast - 349 How to Shred Your Debt and Become a Money Magnet - Adam Carroll, Author, TEDx Speaker, and Founder of The Shred Method

Episode Date: December 14, 2022

We’re so close to the end of Season 15 and I have an awesome guest to help wind down this season. Adam Carroll, the Founder of The Shred Method, is on the show today to talk about everything from debt to allowing yourself to take the time to figure out your life at your own pace. Adam Carroll is a 4-time author, two-time TEDx speaker, and the creator of Broke, Busted & Disgusted, a documentary that aired on CNBC. Adam has spent the past decade studying human behaviour, particularly as it relates to personal leadership and personal finance. He’s also an internationally recognized financial literacy expert and leadership workshop facilitator. In this penultimate episode, Adam shares his own story of getting out of debt and how debt has become normalized in our society. He also talks about the benefits of not rushing to college and acquiring student loans and the simple framework he suggests going into 2023 with a potential recession looming. For full episode show notes visit: https://jessicamoorhouse.com/349 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, Lulu, and welcome back to the More Money Podcast. This is your host, Jessica Morehouse, and this is episode 349 of the show. And we are wrapping up season 15 very shortly. This is the second to last episode before we take a little break for the holidays, and then I'll be back in the new year. But I always like to end off my seasons with some, I mean, not to say anything bad about any prior guests, but I'm just saying I like to leave some really special guests for the end of the season. Just to, you know, end on a high note. Everyone's great. Everyone's great.

I shouldn't have said anything, but I'm just trying to tell you I've got some great guests for the last two episodes. And for this one in particular, you are going to love. And I mean, it doesn't hurt that he is a very well-known TED Talk speaker. I'm talking about Adam Carroll, who has spent the past decade studying human behavior, particularly as it relates to personal leadership and personal finance. He is also an internationally recognized financial literacy expert and leadership workshop facilitator, but he is definitely best known for being a multi-Amazon bestseller, but also his two TED Talks that went totally viral, like millions and millions of views. I'm going to link to them in the show notes for this episode so you can take a look at what I mean. They are so, so good. I mean, so, so good. But he's also the creator of the documentary Broke, Busted, and Disgusted. This documentary aired on CNBC, and I'm sure you can find it online. I'm going to try to find it online to see if I can link to something in the show notes

for this episode as well. But this is all to say that this guy knows what he's talking about when it comes to everything personal finance. But what we're really going to dig into in this episode is debt and wealth and how to not be afraid of debt, but not let it control you at the same time. Because ultimately, debt or credit rather is a tool that can be, well, it could be helpful or harmful. And so we really dig into things that we should all be more aware of when it comes to that. And also what we can do to better build our wealth so we can have more financial freedom and just be in a better place financially. So I know you're going to love this episode. But before I get to it, I just want to share a few words about this season's podcast sponsor. This episode of the More Money Podcast is supported by Desjardins. Does your financial institution share your values? Because Desjardins

is about more than just money. They are on a mission to enrich people's lives and improve the economic and social well-being of Canadians everywhere. Desjardins' main goal as a cooperative is to support its members and make a positive impact on their communities by providing exceptional customer care, offering a variety of financial services, and above all, listening to its members. They've also been at the forefront of sustainable investing as one of the first financial institutions to offer responsible investment portfolios. To learn more about Desjardins and how they're a cooperative making a difference, visit Desjardins.com. Welcome, Adam, to the More Money Podcast. I'm so excited to have you on the show. Jessica, it's a privilege to be here with you.

Oh, thank you. I've been aware of you. I feel like I have seen you speak in person, but it was probably a while ago. But I've been aware of you and seeing your stuff. And of course, a big fan of your two TED Talks for a long time. So it's such a privilege for me to have you on the show. And I mean, you've really done it all. You have lots of books. You speak a lot. You have a lot going on. But for people who are just discovering you for the first time on this show, can you kind of share a little bit more about your origin story? How did you come to be at this place where you're a very well known author and personal finance expert who really focuses, and this is probably why I'm so drawn to you, focuses on like the human behavior aspect and also kind of that personal leadership

aspect as well? Yeah. So my, my backstory is I really wasn't a money nerd until after college. And then I realized the error of my ways and was forced to become a money nerd. And I'm sure there are a lot of us out there. Yeah, that sounds about right for me. Yeah. Yeah. You wake up one day and you're like, oh my God, what have I done to myself? And then you want to dig yourself out of that hole. That was kind of my story. I was a rich college kid, quickly became a broke professional, lived for a year and a half on Totino's and Top Ramen, which was a terrible way to exist. And in the midst of that, I had been dating a woman in college who essentially gave me some harsh advice.

She said, get rid of your debt or I'm going to get rid of you. And so we came together, we got married, we've been married for 23 years almost. And I would 100% squarely place where we are together with the conversation that she had with me early, early on. And it was kind of this realization that if we were going to live a different life, then we had to begin living a different life in our 20s. And so we did that. And I was hooked once I started digging in and realized that public speaking and creating media and all that stuff was really where my heart was. And short circuit all that to where I am today, which is books and podcasts and a documentary and TED Talks later.

You know, here we are. I'm curious, since you mentioned it was your wife who kind of gave you that ultimatum. What was it with her that she like she had this idea that is bad. We need to get rid of it. What kind of like what did she know that you didn't know? Because you're like, oh, I've never really thought about my debt. She's like, oh, no, I know this is bad and we need to do something about it. I'm curious kind of where she was coming from. Yeah, great question. And I think this speaks to the heart of the behavior issue, right? Is that we observe things growing up

that begin to shape who we are and how we make decisions. And the household she grew up in was, I wouldn't say drastically different, but it was different enough from mine growing up that her folks didn't come from a lot, had low-paying jobs when she was very, very young, and they were just completely debt-averse. They operated solely on cash. There was always a fear that they wouldn't have enough money when you're operating on cash. And I grew up in a household where I thought we were maybe affluent or on the higher end of middle class. And my parents were like, we were so broke, you wouldn't even know. And they just used credit to fill in the gaps. And so I grew up believing that, oh, this is what you do.

If you want it, you get it, because we did. And she grew up in a household where they didn't buy it unless it was on sale and they had a coupon. And I think that very distinct upbringing was enough for her to say, no, debt is bad. We don't use debt. This is not part of our methodology. And I was kind of like, well, sure you do. Everyone does. This is how it works. And I would say that there is, you know, this is a question that comes up quite a bit is, is there a good debt? Is there a difference between good debt and bad debt? And I do believe if you are creating leverage and you're creating leverage for cashflow purposes, there is good debt. And you may even lump in student loans somewhat in that. But I have honestly held the belief for a very long time that

most debt is just borrowing from future you. And at some level, that's just problematic if you don't have it under control. Yeah, that's the thing. And I think that's one of the things that I loved about your TED Talk about student loans. And it's a few years old now, but it's still so like, just like you could have literally just done that speech today. And it would have been like, yes, it's 100% relevant. Nothing has changed. Unfortunately, over the years, we still have a really crazy big debt crisis. And the myth and you talk about this in your TED Talk that the kind of the idea that we were sold, I mean, my generation, younger generations are still being sold this idea that you're supposed to go to school at any cost so you can get a good job and then you're going to have a really

successful life. And I feel like, why are we still telling people that? Because that is not actually the root anymore for most people. I mean, most people like myself, I went to university and I don't regret it, but similar to you, it was like, it was, you know, five years. I did it over the course of five years and it was a dream land, magical land. And then you get thrust into the real world. You're like, wait, what? No one, I actually was not prepared. How did no one prepare me over the course of five years for what reality was? That was a kind of a rude awakening. And I was lucky enough that I did pay for school. I got some scholarships, then I worked. And, you know, even looking back, and then I graduated in 2009,

university was actually affordable, even though it didn't feel affordable at the time. And now it is just outrageously expensive. And I can't imagine what it would be, what it's like for students. And it's just, it's just a problem. So yeah, I do kind of, you know, it seemed like that the overall message of that TED Talk was, you know, buyer beware, you know, it's not a guarantee that it's going to be a better life. But you do talk a lot about, you know, yeah, good debt, bad debt, how to use it appropriately. I'm curious, you know, since you've done that TED Talk, I'm sure I've talked to so many people about student loans. What is your perspective? Has it changed? Or do you have any advice for people? It hasn't changed. I think the point of that TED Talk really was

to what you just spoke of. It's like the narrative has to change. The narrative of go to school, get a degree, get a good job and do it at any cost. That does not play today. And what I think parents need to have conversations with their kids and teachers need to have with their students and professors need to have with their students in college is what is the ROI you're going for here? Because there is an ROI. The ROI is you get a degree. What is the job on the other side of that? So if, and I use the example in the TED Talk, if you're going for a French literature degree, you know, unfortunately, all the French lit factories are gone. There is no French literature jobs.

Not many jobs, yeah. So why are you dropping 80 grand on this passion that you could go study at the library or, you know, with a group of book enthusiasts about, as opposed to I have this very dialed-in degree that I hope to get something in, but there are no more jobs. And that even being said, Jessica, one of the things that I'm really aware of is that this is a natural progression for most young people is that, oh, well, you go to college. That's just what you do because it's assumed. And maybe your parents did it, or maybe that's what your parents aspire you to do. And so that natural progression, we also need to insert in there the narrative that it is perfectly okay if you took a year or two years or five years or 20 years to figure yourself out before you go do that. And interestingly, this is kind of a sidebar comment,

but I spoke at, I believe it was Oregon State University. And when I got on campus, they said, actually, I take that back. It was Portland State. They said, this is a very different school. And I said, well, tell me more. What do you mean by that? And they mentioned that the average age of their undergrad was 25 or 26. Yeah, meaning that non-traditional students were coming to that school after three or four years of going and finding themselves. But they said that their graduation rate was higher. The grade point was higher. People came back with purpose and focus and meaning for the studies they were pursuing. And I feel like that we need to normalize. We need to say, God, you're 18. And I think there is a prolonged adolescence today anyway. And so why not let your prefrontal cortex develop a little bit before you actually go make

a decision that could drop you 80 large in the hole? I know. It does seem crazy. I know you talked about this in your talk, but that we, yeah, we're basically children making this really big adult decision that costs tens of thousands of dollars. And for me, like, and I know so many of my friends, we went to school for one thing, we were doing something completely different. And maybe if I had those few years, those three, four, five years or whatever, just to find myself, I wouldn't have, not that I regret it exactly, but maybe I would have not done a film degree and maybe would have just jumped into finance instead of taking a very windy,

expensive road to get to where I am today. But the message I got from my parents in society was, don't take a gap year because it's not a very normal thing to do. If you do, then there is a likelihood that you'll never go back to school and then you'll never get that good job and then you'll earn less and you'll be a failure. And so I'm like, well, I don't want to be a failure. So I'm going to go to school right away. But I feel like that is crazy because it's like I didn't have the tools or the life experience to know what I wanted to do for the rest of my life. I just finished high school, for God's sakes. It's crazy. It is. It is. And, you know, furthermore, your comment about, uh, where did, first of all,

where did you do film school? Uh, so I'm Canadian based. So a school called Simon Fraser University in Vancouver, BC. Okay. So you'll, you'll probably appreciate this, Jessica. After I did the documentary on student loan debt, I got an email from a professor at a school in Missouri. And she said, wow, your documentary was so powerful. And she went on, had a bunch of pleasantries, and then said, I'm really concerned for my son, and I would love it if you could talk with him. He is at USC studying documentary filmmaking at USC. And I'm thinking, you want me to talk to you? I graduated with a broadcasting degree from the University of Northern Iowa. And it was really more like, I was a fun, easy major, so I took it. And I just went out and boldly went after documentary filmmaking because I am naive enough to think that I could do it.

And so, you know, my message to her son was ultimately be an entrepreneur. You don't necessarily have to have a sheet of paper, a slip of paper with your name engraved on it and embossed in gold to prove to someone else that you can go tell a story with your camera. Just go tell a story with your camera. Just go tell a story with your camera. Exactly. Like, I don't ask people, you know, when I watch a movie on Netflix or like I watch a lot of documentaries and I love them, but I never think to, I wonder if the director has a degree. I don't care.

Right, right. Is it a good movie or not? Yeah. I think part of it too, now that I think of it as I've gotten older, is part of it is we're trying to fulfill, I think, a dream or an aspiration that our parents weren't able to fulfill. So my parents don't have degrees. It was a big deal for their kids to get degrees. Sure. As kind of, I guess, a legacy thing or a success thing.

And I know a lot of immigrants as well, they're like, I want to be that person to fulfill this, you know, ambition of my parents. But then also, then you got to look back, you're like, why am I doing this not for me? You know, ultimately, your parents just want you to be successful. And they think that a degree will enable that, but it's not necessarily true. Yes. Yeah, what's interesting about that is that I think what we're both talking about is more of an entrepreneurial fire or flame or bent that someone has and being able to just kind of breathe life into that to say, you don't necessarily have to go learn how to do all these things to just start a business doing that thing. But it does feel scary to just go out on a limb and hang a shingle or start a podcast or build a YouTube channel or whatever it is their thing is. It's hard to do that. With my kids, candidly, one of the things that I'm really focused on with them is they're into YouTube, they're into TikTok, they're watching these creators. And my kids were deep, deep into Dude Perfect. And they really love Mr. Beast. And I said, I want you to do a deep dive onto who these

folks are. How did they get their start? What did they do? Mr. Beast started when he was 12. Oh, my gosh. And his videos sucked. For 10 years, he worked and he toiled and he had all these dreams about what he would do. And he created these time capsule videos for himself. But I said, go back and watch that. That's where you're at right now. So consume it, yes, but create it and create it now and cut your teeth on bad content.

Because at some point, people are going to watch your stuff and be like, I remember when you were terrible. And now it's super fun to watch. Yeah, but that's a long journey. And I think a lot of people don't. Yes. I think, I mean, for me, I thought the shortcut was university that I could cut through all that hard work. But I mean, I think that's just not true anymore. I think it was for a time and it just isn't quite the situation. And then, you know, like you talk a lot about, it's then you finish your degree and then you may still feel a bit, you know, disillusioned and still don't know who you are or what you want to do.

And then you have like $100,000 worth of debt and you're not going to be making that much money. And it's a, yeah, it's a terrible situation that we're still finding and we're still repeating. We're still repeating this mistake. We're not quite out of the woods. And I want to kind of also touch on your other TED talk, which I think is kind of, it kind of clicks in with this. I'm not sure if, you know, it was meant to, but it, you know, you talk a lot about, you know, what you labeled a financial abstraction, which I really like just like this disassociation that we have with money, because a lot of us

don't, I mean, I don't use cash anymore. I haven't used cash in years. And so when COVID happened, they're like, oh, the grocery stores aren't taking cash, only debit or credit. I'm like, that's fine. I've never used cash in the past few years. But because of that, it does feel like we're a bit disconnected. You can just tap. And I talk a lot about conscious consumerism, where you have to think harder about the money you're spending because you don't even see it. Everything's online or you're just tapping. And I think part of it is like with school, you accrual this debt while you're in school. You're like, oh, I'll worry about that later. And then it doesn't really hit you that it is real and money that you actually have to pay back until you finish. And that's the story I hear from a lot of

young people. They're like, I didn't actually understand what I was getting myself into or how much I was boring or that I'd have to pay it back and then the sequence it's it's scary it what's crazy about it is we learn the Pythagorean theorem we learn uh what the the um periodic table of elements is you know we learn all these things that it's important to note I I don't doubt that in school depending on what your major is but at some point you're not going to use much, if any of that anywhere. And what we haven't learned is how to read an amortization table, how to understand how compound interest works against us and for us. And I feel like those are the things that if we taught early and often, which I've really tried to do again, with my kids and the groups that I talked to is like hammer home the idea that

your own financial literacy, your own understanding of simple financial concepts is what will allow you to live comfortably or uncomfortably at some point in time. And yeah, the more conversations I have with young people, and I shouldn't be surprised by it anymore, but I'm often taken aback by just how little understanding there is about things, particularly like what does it take to pay back $80,000 in student loans? It's just that there's not a clue behind that in most cases. I know. I know. So I mean, what is the solution? I know you do talk a lot about debt, which I think is a very timely conversation that we need to have again before I hit the record button. I'm like, oh, man, I've just been thinking a lot lately about what's to come in the next year, 2023. And, you know, everyone's talking about a recession. More layoffs have been happening. I know some people personally that have been laid off. You're like, oh, it's happening. This is very reminiscent of when I was graduating university at the Great Recession. And part of that was not only unemployment, but high debt rates, people having to go bankrupt or figure out some sort of solution. We're in this cycle once again. And it's kind of like, have we

not learned anything over the past 10 years? What are your kind of thoughts, I guess, moving into this? And I'm sure you're having more conversations about debt, because I feel like it's been all over the media. What are your kind of thoughts? And why are we still having these same conversations we were a decade ago? Well, certainly in the US, our entire economy here, and I would guess this is somewhat true in Canada as well, we're based on debt. I mean, if you stripped away the debt that companies took on or individuals took on, our GDP, our gross domestic product would actually be negative, it wouldn't be positive. So we have entire economies that are built upon the acquisition of debt. So we have made it normal, natural, and good to have a significant amount of debt and live that way. And it's just become very normal to our way of life as a consumer. I started challenging that years ago, Jessica. And I think that's why myself and my community are really well poised for what

we're going into. Number one, you know, when my wife and I first got married, we decided that we were going to live on one income. And it happened to be her. She was my sugar mom at the time. It was a pretty good deal. She was making more than I was. But, you know, we decided, hey, we'll live on your income, housing and food and utilities and all that. But my income went to blast away all of our debt. And the reason we did that was we knew that at some point, one of us would probably want to stay home with kids. And I find that we're in the minority big time in terms of people that generally will figure out how to live on one income versus those that are

like, well, we both have to work and then we're going to pay for daycare and we're going to have nice cars. And then our lifestyle rises to meet our income as opposed to keeping our expenses artificially suppressed to a certain extent. And I think for Jen and I, my wife, having lived that way for as long as we did, we just became very accustomed to having lower expenses. And it came to a point where it was just super easy for us to live on one income because our expenses were always lower than one of our incomes. in my mind to not only surviving and thriving through a pandemic or a downturn in the economy, but building true wealth over the long haul. It's very simple. The equation that someone taught me years ago was you have to create a spread between your income and your expenses for as long as humanly possible. And as big as that can be, and as for as long as that can be, you'll retire a multimillionaire. And we have followed that advice.

It's proven to be true. And people who scoff at our method, which essentially is leveraging a line of credit as an income bucket, if you will, where we hold it, but then using that to deploy against debt and to investments, people will say, oh, no, you should be doing this instead. Or my advisor says I should be doing this. And quite often what I'll say is, show me their books.

Show me their network statements. Show me their cash flow. And then let's look at how much they're paying in interest and what their tax rate is. And it can't just be in a vacuum. We have to take the entire person's situation. And you know this as well as I do, but personal finance has to be personal. And so in answer to your question about what do I think will happen or how do we manage this, there will be layoffs. People will struggle financially. Those who have overextended themselves will probably either, I don't want to say get foreclosed on because I think there will be means and measures of keeping homes.

But I think some will have to declare bankruptcy to get rid of credit card debt or some kind of consumer debt or medical debt. And there will be opportunities galore for those who have some cash sitting on the sidelines. Yeah. I mean, that's what happened last time, right? So why would anything really be different? Yeah. And so a simple framework, if you will, for moving forward is, can you cut unnecessary expenses right now and get to a point where you're like, it's leaner. It doesn't have to be super lean, but it's leaner. And we're okay with it being leaner. It doesn't have to be super lean, but it's leaner and we're okay with it being leaner and everything else we're either stocking away for later. We're deploying against

a piece of like an asset, a home where you have equity and you have ability to tap that equity with a line of credit somehow in case things go south. But just prepare yourself. And if you're prepared for that downturn, the next 12 to 24 months should be relatively easy. It's not going to be for some, but it should be. Yeah. I feel like that the worst thing you can do, and this is what most people probably want to do just because psychologically we're like, this is the only way I can cope is just to bear our heads in the sand. But the actual way is to confront it and it's uncomfortable and it's not fun at all um but then once you confront it then you can make a plan and plan a b and c for when things go awry and then when things happen because they will um you're ready for it but i'd rather be in that

position and have that you know kind of moment of like oh my gosh i hate dealing with this or talking about worst case scenarios than having that worst case scenario happen. And I didn't take the time to make some sort of, you know, backup plan. But since you mentioned, you know, one of the things that you do, I know this is something that you've developed called the shred method, which I wanted to kind of discuss, because I thought this was really an interesting, especially since it deals with debt, but in a kind of different way, like how to use it as an opportunity. Do you want to kind of share a little bit about, yeah, what is this method? How did you develop it?

How do you use your line of credit or your home equity line of credit as a way to leverage? And I guess what are, you know, since we talk about how debt can put you in a kind of precarious situation if you're not careful, how do you balance that? How do you make sure you don't get into trouble with using credit? Yeah. All great questions and a good tee up for this model. I want to start out by saying that the essence of this is figuring out how to make your income as efficient as possible. And so I often ask this question when people ask me about it, but if you were to leave your house in the morning to go to, let's say, the grocery store, and you came back to the home to unload groceries, knowing that you were going to go to the post office at 3 or 4 p.m. that afternoon, would you leave your car idling in the driveway all day?

No, that's crazy. Why not? Yeah. Bad for the environment. Yeah, bad on the environment. It burns gas unnecessarily, hard on the car, etc., etc. Well, it's inefficient is the real answer, right? It's just inefficient to do that. But people will park their income, their paychecks in an account, earning no interest and saving them no interest. They'll park it there for a period of time.

And it could be days, could be weeks, could be months or years even. I've known people that have had $10,000, $20,000, $30,000, $50,000 sitting in a money market account for 10 years at a time because it makes them feel safe and secure to have it there. All the while, they're paying amortized interest on a high, high balance debt, like a mortgage or a student loan or something of that kind. And so the shred method essentially, in a very technical term, creates interest rate arbitrage. And what that means is, in a very simplistic term, that someone is willing to pay $5 in simple interest to borrow $100,

knowing that it's going to save them $2,000 on the back end of that debt. And that's effectively what we're doing, but we're creating a very simple way to execute this using your very same income, keeping the very same expenses, but using the home equity line of credit as a tool for efficiency purposes. So instead of leaving your car idling in the driveway, we would actually put that car to work. And in this case, the car or the money is being put to work, blasting away other debts that are being charged compound or amortized interest on them. Okay. How did you develop this? Or at what point you're like, let's try this.

This may change things for a financial future. I wish I could say that this was my invention. I think we've honed it. We've developed it. We've perfected the way it's done. But it was known as an Australian mortgage years and years ago. I think 30 years ago plus, it was introduced by a bank in Australia. And what they had, they offered their clients or their customers what was called a sweep account. And the sweep account was basically their money would go into checking. It would all be pushed over to a sweep account. And then the sweep account had a level of credit attached to it. They could borrow against it.

And so people would dump their income in, but they would have to deploy some of that money somewhere before their income dumped in. It was much like a line of credit, essentially. And where it would go generally is to pay off their debts, pay off their cars, their credit cards, and then their mortgage. So at the time, again, 30 years ago, I don't know about today, a small percentage of Australians actually had a mortgage on their home because they were all actively and radically paying it off quickly. So that model was brought over to the States. It was called velocity banking, and there's a number of other terms for it. And when I discovered the method

and then we started kind of souping it up and how we deploy it, my wife and I in 2012 started doing it religiously, like basically said, okay, we have discipline, we have consistency and predictability, let's just use this. And we paid off a $250,000 mortgage in 3.7 years

and saved about 180 grand in interest in the process over the life of that mortgage. At that point, we lived mortgage-free for about nine or 10 months. And then interest rates dipped to like $2875,000. We did a cash-out refinance of $200,000, deployed that into syndications that started making monthly cash flow. And the monthly cash flow covered our living expenses and then some. And so at that point in time, we essentially were financially free. And we then started shredding that mortgage and we're done with that in under three years. So when people really use this and they deploy it well, it is amazing how fast it works. And it's kind of mind boggling how when you don't have amortized or compound interest working against you, how fast it can work for you on the opposite side. I'm just curious, does this work in an environment like we are now with rising interest rates? Or is this only really great when interest rates go back down?

When interest rates were at 3%, the thing works like a dream, despite the fact that you're paying little to no interest on your mortgage. And we had people say, why would I ever pay this off? I owe so little on this. It's ridiculous for me to pay it off. Um, but we could still show them how we could take a 3% mortgage down to like 0.3% for an effective APR for rising interest rates. It still works and it actually works even better if someone is in a brand new mortgage. So if you have recently bought a home or you're

thinking about buying a home and the prospect of seven or eight or 9% interest rates freaks you out, we can get you down to an effective APR of in the two and a half to three and a half range using the shred method. And you'll knock the debt out in record time, could be somewhere between three and seven years, most cases. So does it work today? Absolutely. It's a little bit different. It's nuanced, right? As the interest rates on the line of credit go up. Yeah, that's the thing. And so does it, so just so I can wrap my head and I feel like now I'm going to have to like Google this to like really understand it like a visual, but what, so so you're you're looking for a line of credit where the interest rate is lower than your mortgage rate. That's how it works. You know, what's crazy is it doesn't have to be.

Most lines of credit today are going to be on par, they're going to be real close, maybe a half a point difference with a with a brand new mortgage. But even if someone's coming at us with a three or three and a half or 4% mortgage, and they have a seven and a half percent line of credit, they're still saving massively more using the shred method than they would if they weren't using it. I'm going to look into this. I haven't come across anyone that's doing it. And my last question about this is like, does this really, because I mean, when you said $250,000 mortgage, I'm like, oh my gosh, that's a down payment in Toronto.

Does this work for people that have substantially bigger mortgages? I know in lots of major cities in Canada, people have $800,000, $900,000 million mortgages. Is it still effective? It works like you can't even imagine when the numbers go that big. I mean, if we're talking about a jumbo mortgage, if you made a, like as an example on a million dollar mortgage, and let's say that million dollar mortgage is at seven and a half percent. If you made one eight to $12,000 lump sum payment at the very beginning of the mortgage. So let's say you're making $15,000 a month, right? Which I would think you would have to be close to that or more to afford

a million dollar mortgage. But if you're making that much money and you're able to put $8,000 to $12,000 one time from the HELOC over to the mortgage, and effectively what you're doing is you're making room on that line of credit for your income to then dump into, that one payment will save you upwards of $80,000 to $90,000 in interest in month one. This is the key, in month one. Because on a million-dollar mortgage at 7.5%, do you know how much the interest expense on that would be, Jessica? Here's a pop quiz. I can't do that math. It's a million and a half dollars. So someone that buys a million dollar home today at seven and a half percent would pay two and a half million over 30 years time. And with the shred method, what you'll likely do is you'll go

from two and a half million down to probably a million, two million, three, and you'll likely do is you'll go from $2.5 million down to probably $1.2 million, $3 million, and it'll only take you about four or five, maybe six years total to pay the whole thing off. Now, in the middle, you might recast the loan, you might refinance at a lower interest rate, and anytime you do any of those things, you can go back and redeploy the shred method and still get massive, massive benefit in the process. What are some, you know, I feel like this could work for people that are responsible with credit like yourself and your wife, but what are some of the risks or, you know, things that may not work out for somebody if they do XYZ? This is why I love financial podcasts because people are always like, how about the people

that aren't that good with money that are still, you know, they're listening, they're getting better, but they're not quite there. I mean, you know, cause that's the thing you hear all the time. People like, I've got this great strategy and it doesn't, you know, nothing works a hundred percent of the time. So it's like, and, and, or even just people considering it's like, what are some things that I need to know to make sure it does work? Yeah. So I'll give you a couple of the things that I would say when we work with new clients. These are our kind of check boxes that we're going through to figure out if they're going to be a great shred client or someone

that's going to need a lot of handholding. Number one, are they consistent? Are they disciplined? So do they balance their checkbook if they're still doing that kind of thing? We need to make sure, this is checkbox number two, that they have to have more money at the end of their month, not more month at the end of their money. And if someone is like, well, I'm right at the line every single month, not for you. This could get you out over your skis too fast. And it's easy to be lured into a false sense of security because you have that line of credit available to you. What we're using it as is a tool, much like if you're a Fast and the Furious movie fan, they put nitrous oxide in their gas tank to go faster. The HELOC is used like NOS, like NO2 in the gas tank. It's used to go

faster, to blast away debt faster. But if used inappropriately, meaning someone's like, well, I'm going to go on a shopping spree now, or I'm going to go on vacation because I deserve it. I deserve this. Any time that you're spending is based on deserving and you're going over and above, it's probably not the best tool for you. But if someone is, they make good money, their income's predictable and consistent. And even if it fluctuates a little bit, it's still very fluid, but they always have more money at the end of their month. They're good about budgeting to a certain extent, and they're looking for a way to be more efficient, to get ahead somehow. And when we talk about getting ahead with our clients, a lot of people will contrast that, well, I want to get ahead. I'm going to invest in crypto or I'm going to invest in the stock that just went down

because I know it's going to double next year. That is all very speculative. But when we're talking about getting ahead using the shred method, when you pay off debt, there is a guaranteed return on that. And we're looking at a short-term guaranteed return on the money. And then maybe you go into some of the other things because you've been diligent and wise with your money using the shred method. It's not an either or, it can be a both and, but that's one of the things that we love doing with our clients is saying, tell us your goals. What do you, what are you after? What do you want to do? Are you working with advisors? Do you have,

you know, CPAs and tax people that you're working with? And then let us just help you with debt and equity strategies to actually get ahead in this. Even if you use it for 12 or 18 months, you're still going to be miles ahead than where you were before you use it for 12 or 18 months, you're still going to be miles ahead than where you were before. Interesting. I like how we kind of did the full spectrum of talking about how the dangers of debt, but then also how you can use debt for a tool for good. Because I think that is a conversation that isn't discussed enough. I mean, essentially, or especially when I was starting to learn about personal finance a decade ago in my 20s, the conversation was just how bad debt was. And that could have just been the sign of the times

of so many people were in debt. It's kind of an epidemic. We need to discuss it because too many people were maybe over leveraged. But I think it is equally as important to talk about how you can use debt as a tool for reaching your goals and paying off your debt, you know? But sometimes I think it's sometimes not as easy as just talking about the debt avalanche method or something like that. Yeah. Yeah. Well, and not only that, but debt payoff fatigue is a real thing. People get in that process and they're like, I just want to buy a purse. Yeah. I just want to have some fun. I just want to go out some fun. It's not fun just paying off debt over and over for years and years and years. It sucks. That's true. Yeah. And, and I will tell you that one of the things that attracts folks to the

shred method, um, comparative to some of the other, uh, uh, strategies that are, that are espoused out there, uh, on talk radio, I will mention no names.'t mention no names, is that I had a client come to me and she said, I love the fact that I can go to Disney with my kids and not feel guilty about it. Because that's part of this deal is like, we want you to go live your life. We want you to have things and be with people and have experiences. But it's about making sure that you're efficiently using the income that's coming through your system, as opposed to letting money

sit idle for extended periods of time, all the while it's costing you a fortune to have debt stacked up elsewhere. Right. So it sounds kind of like you are anti the idea of having that three to six month emergency fund in cash and a high interest savings account. Is that or is it just, well, you could, depending on how big that amount of money sitting in there, you could be using that money. You don't want to have too much cash, basically. Yeah, so I love this question and I love this whole discussion because personal finance is very personal, right?

And the authors, the other authors out there on Barnes & Noble bookshelves will all say, got to have three to six to 12 months worth of living expenses. But if someone's expenses are five grand a month and they make $6,000 a month, they have to save for five years to put away 12 months worth of living expenses. And I don't think anybody's going to, I think they're going to get so tired of doing that. And at some point they're going to be like, what is the point? I have this money or I know that I'm employable as an example. So the whole personal side of how much you need to have in savings, to me, is a question of if your current

income stopped tomorrow, number one, how long could you live your current lifestyle based on the assets that you've accumulated? And number two, if you needed money right away, how quickly could you gain employment? So for me, I know just because of what I've done for the last 15 years, Jessica, and I know you're this way too, from an entrepreneurial standpoint, we know eventually it becomes ingrained in us. We know how to go create value and get compensated for the value we create. And there are some people that the only way that they get compensated is by showing up at a job and getting paid a salary, nothing against them.

But how long will it take you to replace that job at that income level? Is it two months? Is it six months? That should be the determinant of how much you have set on the sidelines. And or do you need it available or do you just need access to it? So available would be like, oh, I see it. It's sitting in my safe or I see it. It's sitting in my money market account, but access could be it's in the equity of my home and I can access it anytime I want using a home equity line of credit. And I know it's there and I know that it keeps growing because I keep paying down the mortgage more and more and my HELOC keeps growing higher and higher. So it's a strategy. There's a method to my madness.

But I will tell you this. My wife years ago gave me a number and said, this has to be in this account or else I can't sleep well at night. And I honestly believe that couples need to have the what number freaks you out and what number doesn't. Because if they're not simpatico on that, there is going to be conflict with money, no matter what. Yeah, I feel like everyone has a number or a percentage or something that just makes you feel safe. And that is, yeah, it's a different number for everyone. Sometimes it doesn't fit into that three to six months kind of category. But yeah, it's, it's like, you need to have, like, I have a number, my husband has one.

We have those open conversations often. Um, especially as things have, uh, you know, escalated this year with the inflation and interest rates and stuff like that. Um, you know, we have those conversations to be like, okay, do we still feel good or do we feel really anxious? Cause the worst thing, uh, you're never in a good position when you feel really anxious and stressed out about your money because that may lead you to make some really not good decisions with your money out of desperation. We don't want that. This brings up a good point. I would ask the question, and I would have your listeners ask themselves the question this, what would not worrying about money feel like? And what would need to be true in order for you to feel that way?

So if you felt no worry, no anxiety about money whatsoever, what would need to be true? And think about like, what would need to be true in terms of how much is in savings? What would need to be true about insurances? What would need to be true about how much debt you're carrying at any given point in time? We started asking ourselves that question, what would need to be true for us to never have a worry or concern or anxiety about debt or about money at all? And in my latest book called The

Build a Bigger Life Manifesto, I wrote about the idea of making money irrelevant in your life. And when you've made money irrelevant, you just go make decisions about what you want in life, but you don't necessarily have to focus on the cost or the opportunity cost or any of those kinds of things. Because you've just built a life that works and money's kind of irrelevant in that life. What would need to be true for someone to live that way? And then just go about building that life. It actually doesn, it actually doesn't take very long. It takes maybe 24 to 36 months to build a life like that. Well, that sounds doable.

We've all got that time, don't we? Yeah, for sure, for sure. But yeah, I feel like too often, you know, I mean, I've been talking about money for a long time and too often it's how do we stop getting money to control us and our future, our goals, our desires? And how could we flip the script so we're in control? And that's kind of what you're saying is like, how do you build a life that money isn't dictating your life?

It is a tool you can use to get the life that you want. Yes. Yeah. And I would be remiss if I didn't say that that script that was going on in my head and certainly was going on in my wife's head for a long time is a byproduct of the environment we grew up in. And at some point I realized through a lot of mentorship and guidance and going to seminars and conferences that the message I really needed to tell myself was money comes easily and frequently. And that I get more checks in the mail than I do bills. And I kept just repeating these mantras, you know, money comes easily and frequently, and I get more checks than I do bills. And all of a sudden, that started to become true. Because if I was focused on,

oh, here's another bill, I got more debt, I would see that. There's a saying that your eyes only see and your ears only hear what your mind is looking for. And if you're looking for the debt and the reminders of how broke you are, you will be reminded of how broke you are. But if you are reminded of and tell yourself often how abundant you could be and how easily and frequently money comes, you'll start to notice that as well. Even if it's a penny or a nickel on the street that you keep finding, you're like, geez, it's just everywhere. Yeah, you'll just start to see opportunities that already always were there,

but you maybe ignored because you're too focused on their present day-to-day kind of struggles instead of, well, if you work really hard to do this, you'll get that. I see what you're saying it's like i mean it's the whole scarcity versus abundance um conversation because i lived in scarcity still have that a little bit it's hard to get rid of but once you do open up to that idea of no you you can have more even if you've never had that i think that's the hardest thing it's like but i've never had that so how can can that be true? But once you open yourself

up to that, you will start to see opportunities that were always there that you just never maybe even considered or didn't think that they were for you or that you could pursue. Right. Yeah. Totally agree. And I would challenge everyone to do this. Scream at the top of your lungs sometime today in your home, around your phone, I am a money magnet, and see what changes on your Instagram reels and your Spotify channel. Ooh, yeah, I get that algorithm to show you some positive money affirmations, right? And they'll probably show you side hustle shows and all these hacks that people are using to make money on the side. It's wild. I mean, this is probably the pro and the con, right? The con is they're always listening. They're always listening and there's a lot of

crap out there. So you got to sift the good with the bad. Buyer beware. Buyer beware, yeah. But if our eyes will see and our ears will hear what our brain's looking for and our brain's looking for, I am a money magnet. It'll amaze you, your listeners. It'll amaze your listeners how much changes in social media. Oh, that's exciting. That's cool. I'm sure a lot of people are going to hopefully try that out and see what changes. What do you got to lose, right? Yeah, let us know. Yeah. Well, Adam, it was so, so amazing having you on the show. You mentioned a few things. Where can people find you? You have four books, right? But your latest one is called Build a Bigger Life Manifesto, which I think is a great kind of companion to what we discussed today. Where can people find more information about you and grab your book and maybe even try out the Shred Method?

Yeah. Well, the Shred Method is probably the easiest one to go to. It's theshredmethod.com. And we have a free masterclass there. There's a savings analysis that you'll plug in your numbers and it'll tell you exactly how fast you could be out of debt and how much you'll save. Um, if you're interested in more about me personally, and some of my work, the Ted talks, the books, et cetera, uh, go to Adam Carroll with two R's and two L's dot info. So information on carol adam carol dot info

and i would highly highly recommend to those listeners out there that have kids in high school or college or maybe you're you're uh you know beginning to plan and prepare for your children to go to school at some point in the future go watch the documentary brokeke, Busted, Disgusted.com. And Broke, Busted, and Disgusted is a great look at the causes and repercussions of student loan debt. And there's some great stories in there. We have some heroes, but there's also some horror stories to avoid. And that's really what we're trying to accomplish through that is let's get some young people through school with no debt as opposed to lots of debt so that they have the ability to springboard into the life that they truly want. Absolutely. I mean, I will say, and I've said this on the show many times, one of the best things that, I mean, helped me, even though I was broke when I graduated

and, you know, was an ideal situation, not finding a job and all that kind of stuff in the recession. However, because I had a very small student loan of $5,000 that I paid off within eight months of graduating, I know that was such a privilege for me because I got to kind of accelerate and everything I earned I could save. I didn't have to spend 10 years paying off my student loan. So if we can figure out a way to teach the next generation to kind of avoid some of the things that we did, like, you know, having all that big student loan, I think they can be on a better footing when they, you know, start their adult lives. Could not agree more. Well, thanks again for joining me. It was so great chatting with you. Jessica, so good to be on your show. Thanks for having me. And that was episode 349 of the More Money Podcast with Adam Carroll. Make sure to check him out

online. You can find all the links in the show notes for this episode, jessicamorehouse.com slash 349. But also you can find him at theshredmethod.com. And also on Twitter, it's at Shred Method and Instagram at the.shredmethod. But I will link them very easily in the show notes for this episode. And similarly, if you want to check out his program, I'll link to it. But his TED Talks that you may want to check out because we did talk about them in this episode, I'll link to those as well. They are, of course, on YouTube. So if honestly, if you just Google Adam Carroll in YouTube, you'll find them very easily. But I'll make it easy for you to if you just want to go to my

website as well. And I forgot to mention this at the beginning of the episode, but of course, since he's an author, I'm going to give away a copy of one of his books. So stay tuned, stay around to find out more details about what book and how you can enter to win. I just want to share a few words about this season's podcast sponsor. This episode of the More Money Podcast is supported by Desjardins. Do you feel valued at your financial institution? Because Desjardins. Do you feel valued at your financial institution? Because Desjardins is on a mission to enrich the lives of Canadians, help build stronger communities, and educate its members so they can confidently reach their financial goals. Not only do they offer one-of-a-kind customer care and offer a variety of financial services

to fit your needs, as a cooperative, they put their members first. So if you're looking for an institution that's making an impact, look no further than Desjardins. To learn more about Desjardins and how they're making a difference, visit Desjardins.com. Okay, so more on that book contest. So FYI, in case you're new to listening, this is your first episode, or maybe you forgot, I'm giving away a ton of books, a big batch of books. And you can find all of those. I mean, you can go to there's a link always in the show notes for every single episode. JessicaMorehouse.com slash contest, though, is the page where you can find all those books. So again, JessicaMorehouse.com slash contest is where you can find all the books that I'm giving away. You can enter to win any of them. You, of course, will only win one if you're a lucky winner. And for this particular

episode and guest, I'm going to give away, because he has lots of books, I'm going to give away the book that he wrote just a few years ago called 30 Days to 1K, Learn How to Control Your Money, Regain Your Freedom, and Achieve Financial Contentment. Because I feel like that would be a great book for someone to get at the start of the new year, you know, kick things off on a, you know, all right, we got 30 days, like that's a great New Year's resolution. It's giving you an actual like schedule and like timeline to go with. So if you want to enter to win his book 30 days to 1k, then you can just do that by going to jessicamorehouse.com slash contest to enter to win. Now some other things that I want to share with you in case you don't know. First and foremost,

and I've mentioned this on some previous episodes, I have been doing a big, big update that's taken all year of my budget spreadsheets. And this is a great opportunity to get it now in time for the new year and start. I mean, if you don't want to start, you know, doing it mid-month in December, that's totally okay. You can just save it and start budgeting and doing all that good stuff in January for the new year. You can find all of those at jessicamorehouse.com slash shop. They should all be available now because I've been working myself to the bone to make sure

they are all ready and the video tutorials are all filmed and everything. I'm telling you, I've been doing some very late nights trying to get them all done for you, but you can find them at jessicamorehouse.com slash shop. Also, you may not know this, but I do have an investing course called Wealth Building Blueprint for Canadians. It is specifically built for Canadians who want to learn about passive investing or index investing, something that I talk about ad nauseum on the podcast. If you want to be a boring, simple investor like myself and get those fees, those investment fees down, invest in the entire market, just try to match those market returns and not waste your money or your time trying to beat the market because it is very difficult to do.

Just check SPIVA, S-P-I-V-A, honestly. And you will know what I mean. But also just check out any episodes I've had for the seven years I've had this show. Every, I swear, and I don't try to talk about it, but every investment expert I've ever had on the show will talk about how passive investing is probably the best strategy for most investors. It just is great. And it's very straightforward and transparent and easy. And I teach you how to do it as well as a bunch of other important things you should understand about investing as a Canadian. In my course, you can find info about it at JessicaMoorhouse.com slash course. Honestly, if you just go to my main website,

there is a link in my the menu, the top menu that says course and you can find all the information about there and how to apply all that good stuff. So that is it for me. But as a reminder, next week will be the final episode 350. Oh, I love that ending it on such a nice even note. So make sure to come back here next Wednesday for the final episode before we take a little break before 2023 starts, which is wild. Doesn't that sound like a future year? Like that sounds not like a year that we are living. That is so bizarre to me. So I can't wait to share that final episode with you because it is a good one. But stay, you know, warm, stay safe. Big shout out to my wonderful podcast editor, as always, Matt Rideout. And I will see you back here next

Wednesday for the season finale of the More Money Podcast, Season 15.