Episode 321

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Everyone wants to make and have more money but understanding all the available financial options and opportunities can be overwhelming. Many agency owners are juggling debt, income, personal and professional mortgages, and complex investment plans, most of which are managed by advice we were given by our parents when we were young. We’ve heard of ways to use our money to make money, but it all sounds a little impossible to believe.

Adam Carroll is one of the nation’s top financial educators and he is here to cut through the confusion and show how viable many of these options really are. Adam is a long-time friend of the Agency Management Institute, and this conversation is his third visit to the podcast and follows his well-received appearance at the Build A Better Agency Summit.

In this episode of Build a Better Agency, Adam and I discuss a lot of the available tools and methodologies available for helping people reach financial security and freedom faster and in much bigger ways than might seem possible. We look at ways to double your money in 3 years, better understand the power of compound interest, and identify the different kinds of legacy. We talk about how we all need to start thinking about wealth differently by starting to ask ourselves bigger, different questions about our goals and dreams.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.

Make More Money

What You Will Learn in This Episode:

  • Understanding the “Shred Method” for reducing debt
  • How to double your money in 3-5 years
  • Why it doesn’t make sense to hold onto a long-term mortgage
  • The power of compound interest
  • Identifying the 4 kinds of legacy
  • Equity planning
  • How to start thinking differently about wealth
  • The importance of joining a Mastermind
“The goal of reducing debt is to help people free themselves to be themselves.” @adamcarroll Click To Tweet “Once you’ve paymented yourself into a corner, if there’s not a lot of extra income, it’s hard to get out of that debt because you’ve created the ideal situation for your banker.” @adamcarroll Click To Tweet “We’re still working off advice that no longer serves us.” @adamcarroll Click To Tweet “You have to stretch what is possible right now.” @adamcarroll Click To Tweet “Your mind has to create bigger answers when you start asking bigger questions.” @adamcarroll Click To Tweet “You must surround yourself with people who are thinking bigger, who are asking bigger questions, who are asking you questions that you are not asking yourself.” @adamcarroll Click To Tweet “Finance is changing in a big, big way.” @adamcarroll Click To Tweet

Previous episodes with Adam Carroll:

Ways to Contact Adam Carroll:

Tools & Resources:

Speaker 1:

Welcome to the Agency Management Institute Community, where you’ll learn how to grow and scale your business, attract and retain the best talent, make more money, and keep more of what you make. The Build a Better Agency podcast presented by White Label IQ is packed with insights on how small to mid-size agencies survive and thrive in today’s market. Bringing his 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McClellan.

Drew McClellan:

Hey, everybody. Drew McClellan here with another episode of Build a Better Agency. Welcome back, if you are a regular listener. And if this is your first one, you picked a great one to join us on. So I always try and make sure that our guests are bringing you something new to think about, a different way of approaching your business or your life or your money. And today’s episode is not going to disappoint. So my guest today is actually a three-peat guest. So this is his third appearance on the show. Adam Carroll is one of my closest friends. We’ve been friends for about 20 years. We’ve been in a mastermind for almost all that time and we’ve just had great influence on each other’s businesses because we’ve just been in it in the trenches together for so long. I know he has had a huge influence on the decisions I’ve made around how I run my business. Super grateful for him and his wisdom.

Drew McClellan:

Adam is financial literacy guru. He helps people understand their money. He helps people leverage their money. But what he really does at the end of the day is he helps people get out of debt. He helps people take what money they have and create more money so that they have freedom. So they have freedom to change their family’s lives. They have freedom to change, generationally, their family’s lives. The freedom to change their community, the charities, or the causes that matter to them.

Drew McClellan:

All this freedom comes from being smart about how you leverage your dollars. And Adam’s got it down to a science. I swear by his methodology, he certainly has helped me change my family’s life. He was a huge hit at the Build A Better Agency Summit. People loved his message and many people have now engaged with him to do work around their own sort of legacy building. I wanted to get him on the show, so you all could meet him and learn from his wisdom.

Drew McClellan:

So without any further ado, I want to jump right into this because I have a feeling this is going to be a long episode, because I have a lot to ask Adam. So let’s get started.

Drew McClellan:

Adam, welcome back to the podcast. It’s good to have you.

Adam Carroll:

Drew, it is great to be back.

Drew McClellan:

You’re a three-peat. This is your third time back. But after your appearance at The Build A Better Agency Summit and the way the agency owners just gravitated to your message, I knew that we needed to come on because we really haven’t talked about your business and how you help entrepreneurs build wealth and allow them to create a legacy. So I want to make sure we talk about that because that resonated so deeply, I think with the audience to the point that you’re coming back to the summit as a keynote speaker next year. So it’s awesome.

Adam Carroll:

I cannot wait. It was such an amazing event. And not to too your own horn, but I know that you know your audience is amazing. The tribe is… They’re rabid fans of all the content. They’re super supportive of one another, which is amazing. It was just blown away. I’ve been to a lot of conferences and your summit was far and away the most familial of any I’ve ever been to. And it’s amazing to be in a group of people where there’s seemingly no competition.

Drew McClellan:

Yeah. The community aspect of the work that we do is so strong. Once you get bit by that bug and you realize for every little bit I give, I get so much back. Then everybody is like. Well, crap, I want to keep giving more then. So it’s just snowballs and it’s good. It’s kind and it’s profitable for people. It’s a good combination for sure.

Adam Carroll:

It’s awesome.

Drew McClellan:

So one of the things that you talked about at the summit and one of the things you’ve been talking to a lot of agency owners that met you at the summit is this idea of no matter where you’re at financially, there’s opportunity. So if you’re deep in debt, if you are out of debt, but you have no real equity or cash to do anything with or on the flip side where a lot of agency owners are is you do have some access to cash whether it’s a HELOC or you’ve got some investment money, or you squirreled away some money.

Drew McClellan:

A lot of people aren’t really leveraging the position they’re in as well as they could. So let’s start with the folks in debt. So if somebody’s got debt, personal debt, debt inside the agency. I know that you have accelerators that you apply with your clients to reduce and eliminate that debt so that they actually do have some equity to do something with faster.

Adam Carroll:

Yes, that’s right. The method, the strategy that we use is called the Shred Method, Drew. Essentially what we’re doing is we are… To boil it down to the most basic and ridiculous statement, we are leveraging a simple interest home equity line of credit in most cases, against a compound interest loan. That could be a mortgage. That could be a building loan. That could be student loan debt, credit card debt, car loans.

Adam Carroll:

And the goal of this for me anyway, is I want to help people free themself to be themself. What I found is if people will take on loads and loads of debt, but they’re doing it based on how much payment they can afford. And once you’ve painted yourself into a corner, if there’s not a lot of extra income or big income events, whether that be distributions or dividends or something of like, it’s hard to get out of that debt because you’ve literally created an ideal situation for your banker, which is I’m going to get all my interest up front, and eventually you might own this asset.

Adam Carroll:

But likely not, because you’ll either move on, sell the car, trade up, what have you. So if someone is in debt, the very first thing that I want to do with them is determine how much discretionary money there is. So if there is some extra every month, the key there is what are you doing with it? How efficient is it? And unfortunately for most people, they’ve fallen under the spell of we got to have six to 12 months or more of living expenses in the bank.

Adam Carroll:

For business owners, it’s a little bit different scenario because the agency owners I know that I met at the summit, they have many clients. Many, many clients. So they could get fired by one. It doesn’t necessarily mean that they’re they’re destitute. They can’t afford their bills.

Drew McClellan:

Exactly, right.

Adam Carroll:

So the goal is figuring out what are you doing with the extra income to be able to begin shredding some of those debts right away. Freeing up really valuable cash flow because your income like the flow of money through your household economy, that is the key to this thing working.

Drew McClellan:

I know that you gave some examples in the summit and of how quickly the Shred Method can reduce some… So for example, I have an agency owner that I know you’re working with that built a new home reasonably recently and the mortgages north of 500 grand. After you sat down with their finances, you were like, “Yeah, we can that off.” I think it was three or four years and he called me and he was like, “Oh my God, I can be mortgage free in three years.” Talk a little bit about that because that sounds absurdly ridiculous.

Adam Carroll:

Yes. It’s absurdly ridiculous because of the belief that we have probably from growing up where our parent or some parents said, “Well, you’ll always have a mortgage.” Right?

Drew McClellan:

Right.

Adam Carroll:

There are times drew where I think it’s smart. We should have a big, long, 30-year fixed mortgage. But the reason to do it is not the reason you think it is. It’s to deploy that money into something that generates cashflow.

Drew McClellan:

Right.

Adam Carroll:

For most of us buying a big, beautiful new home. That’s great. It’s wonderful. But it also carries with it two, three, $4,000 a month in payments. I think as an agency owner especially we’re mindful of maybe how much we pay ourselves, how large our lifestyle gets in relation to how big the agency is. When you realize that in three years time with the exact same income that you’re paying yourself right now, you could have no mortgage payment on a half million dollar home.

Adam Carroll:

It’s mind boggling and it’s super cool when you see it in action, because what it does is it creates a tremendous amount of liquidity for the owner, which is then great. Should they need to buy a building or invest, or grow their personnel? Whatever it may be. The liquidity is there and it’s… Though it may be in the equity of their home, it’s completely liquid because we have that HELOC attached to it. And the HELOC just continues to grow as we pay down that mortgage.

Drew McClellan:

Yeah. You know what, I know one of the things that we were talking about is that for a lot of agency owners, their tenacity and their unwillingness to bail on the business over time, basically, they’ve just stubborn themselves to be successful.

Adam Carroll:

Totally.

Drew McClellan:

They’ve just hung in there for so long. And it’s not that they’re not smart or whatever, but they’ve weathered all the stuff that most people would be like, “Nope, I’m out.” And agency owners, for some reason, this is one of the things I love about them is their tenacity and persistence. They are just unwilling to give up. So sooner or later they build some success and some wealth. But I think sometimes they’re so surprised by their own success that they just sort of sit on that success. Right?

Drew McClellan:

They just let the money build up and they let it build up sometimes in the business. So they’ve got too much equity in the business. Then they make bad fat and happy decisions about that. They spend it poorly or they tuck it away in a personal account to your point of like, well, I have to have 12 months of living expenses in the bank and it just sits there doing little to nothing.

Drew McClellan:

I know one of the things that you help your clients do is sort of identify, “Okay. Well, let’s look at what we have.” You could do more with this. You could be a little more assertive with this. You talk about the doubling. So talk a little bit about what, what you mean by the doubling.

Adam Carroll:

So this is such a great question. I want to go back to one of your statements about the tenacity, the persistence they have. I have the utmost respect for entrepreneurs who just will see whatever way through that they need to.

Drew McClellan:

Absolutely.

Adam Carroll:

And the cool part about agency owners I’ve found so far in talking to some of your tribe is that they don’t sell a widget most often. They could reach into their bag of tricks and create equity and value in a variety of things.

Drew McClellan:

Absolutely, right.

Adam Carroll:

They’ll test and tweak and experiment until they find the thing that for most of them, it seems like they go, “Yeah, it took me a while and then I found my sweet spot. Now, we have X number of clients paying us X a month, and it’s all good.” This whole idea of doubling that you asked about. So number one, people put money on the side and they keep money in savings out of fear for the most part. Some people would say it’s practical. I could argue that it is, and it isn’t, but some people will say it’s practical.

Adam Carroll:

I believe that they’re doing it because they’re afraid that at some point in time, the income will stop and they’ll need to tap that money to live. I would begin to question somebody who’s been in business for 10 years, 15 years, 20 years. You’ll never have that ever. Because you figured out the game. That’s for young people. So we’re still working off of advice that no longer serves us. It was advice we got when we were young and we probably got it from our parents who also had no money by the way.

Drew McClellan:

Right. And I think to your point by then, they’ve learned… One of the things I remind agency owners all the time is your business can weather big ups and down. And if you run your business wisely, you run it by the metrics and the numbers, you can always pay yourself what you’re paying yourself.

Adam Carroll:

Right.

Drew McClellan:

You can always be profitable if you have three employees or 300 employees. And if you had 300 and you get down to three, that doesn’t mean you have to pay yourself any less. It doesn’t mean you have to take less out of the business. In fact, I have agency owners that as they shrunk their business, they actually made more money. So again, a reminder to them that if you do this well and right, and if you’ve been in business 10 or 15 years, you’ve done it well and right. You’ve weathered at least one economic downturn. So there’s always going to be money for you.

Adam Carroll:

Yeah, exactly. So when I talk to people about doubling their money, I want to give you a really concrete example. Let’s say you’ve got an agency owner and we could use the case in point that we already talked about. Half a million dollars, new home. Probably making decent money every month, but has done everything. Maxed out 401k, maxed out Roth IRAs. They probably… Whether or not they’re investing in real estate. At this point, I don’t know. But they’re doing everything. And the last thing that they’re seeing is money start to pile up in the business.

Adam Carroll:

They’re making maybe their mortgage payment and a little bit extra. Two, 300, 500 bucks extra goes to the mortgage payment. Well, my stance on that is you’re already doing part of this, you’re just not doing to the extent that you could.

Drew McClellan:

Right.

Adam Carroll:

So if you send an extra 500 in, okay, you’re going to take a 30-year fix down to, let’s say 12, 13, somewhere in there. You’re going to save a pretty significant amount of interest. In using the Shred Method, what would happen is in three years time, you’ll blast away the 500… I think it was 3.8 years. But you’ll blast away the $500,000 mortgage. And then what happens is you’ve got ostensibly $500,000 worth of equity in that home. That’s nearly all available to you on the HELOC.

Adam Carroll:

What I might recommend people do is take 100 or 200 at a time and flip that into an investment that… And we’ll talk out these here in a minute, Drew. I’m sure you’ll ask about it, but flip it into a wholesale type investment where you’re not going to make six or 8%, you’re making 12 or 14% per year.

Drew McClellan:

Right.

Adam Carroll:

And the risk is minimal. And people are like does that even exist. It does when you can write a check for 100 or 200 grand at a time. Even non-agency owners, non-business people, employees, clients of mine that are like… I’m not sure that’s possible in three and a half, four years. Then I show them three years later, they have three or $400,000 in equity in their home. I’m like write $100,000 check, you’ll get a 14% return through this particular investment. The money that you’re going to get monthly will cover whatever interest expense you have and then some.

Adam Carroll:

What happens is when we do this over and over and over again, you end up essentially doubling your money somewhere between the three to five year mark.

Drew McClellan:

Staggering, yeah.

Adam Carroll:

And again, when people are like, “Is this for real?” It is. What else are you going to do with the money? You could go blow it. You could go buy cars and trips and furs and whatever else you want. Or you could create generational wealth that literally changes your family’s financial tree. And you could do it in a short amount of time, 10 years or less.

Drew McClellan:

Yeah, which sounds impossible until you look at the math and you go, “Okay, I’m sitting on a home equity line of $300,000. I haven’t tapped it. I don’t owe any money. That feels great. I don’t owe anyone any money.But what if I use some of that money to make another $100,000?” I mean, the logic of it when you see math is pretty clear.

Adam Carroll:

Super clear. I’ll tell you the common argument I get is… But I like to deduct my mortgage interests. I get that a lot. When I ask them, well, do you itemize? Now if they do and they’re really adamant about itemizing, they do a good job of itemizing deductions, they could maybe get there. Right?

Drew McClellan:

Right.

Adam Carroll:

But the reality is that a couple on a standard deduction write, I believe it’s 25,000. 12,500 per person. So you’re going to take a standard deduction at $25,000 a year. You’re going to have a six or $700,000 mortgage at 4% in order to write off that much mortgage interest. And for most people, it’s just not the case. So the government’s actually done away with that excuse. It doesn’t make sense to carry a long fat mortgage anymore.

Adam Carroll:

And there’s one more point on that, Drew, I want to circle back to you that’s about compounding and compound interest too. We can talk about that here in a minute.

Drew McClellan:

So my dad, who is a banker, I don’t even know if I’ve ever told you this before, but I can remember being a kid and him saying to me, “Drew, do you know what the eighth wonder of the world is?” “No.” “Compound interest.” He would preach that over and over again.

Adam Carroll:

Yeah. Well, and here’s what’s amazing about it, Drew is we put money in 401ks and Roth IRAs and investment accounts in order to get to a point where there’s a big, shiny pile of money in there that then compounds. But for most people, what they’re also doing at the same time is they’re making all these minimum monthly payments on all their other debts, which is nothing but compound interest.

Adam Carroll:

So when I show people the power of what if you drill… Like a laser beam went after the compound debt and then flip flopped and began building compound equity in investments. You can exponentially increase your wealth that much faster by doing that.

Drew McClellan:

Well, it’s sort of double compounding, right? Because you’re not paying the negative compounding, but now you’re getting more on the positive side.

Adam Carroll:

Yeah. All I can say is it’s staggering. When you look at the numbers and you show it. When folks say it’s too good to be true, or what will my investment person say? Guess what? The bankers, investment brokers, nothing against them, but their business model has made them rich. And if you look at the average wealth in America for… Business owners are soon to be retirees, it’s not as high as it could be or should be.

Drew McClellan:

Yeah. What about the people who think this sounds risky?

Adam Carroll:

I’m always blown away by that comment because the people who say, “Well, you’re taking out debt to pay off debt.” And on one hand that is an accurate statement. Although the debt, we’re taking out in the way of the HELOC. A is simple interest and B, we can control how much or how little we take out at a time. So I’ll often say to people, let’s put a guardrail around that. How much would you feel comfortable with?

Adam Carroll:

In some cases, these folks already have 10 or 20 grand in credit card debt. And my comment back to them is that seems risky to me. So you’re already used to taking it out. What’s the difference? You’re just now taking it out to blast away this debt. I’ll tell you what’s intoxicating is when you start to see or more chunk down. You’ve done this a number of times.

Drew McClellan:

Yeah, right. I’ve done it. Yep.

Adam Carroll:

And you see it chunked down. It’s like somewhat intoxicating to li