What if we told you that you could be mortgage-free in just three to five years?
Adam Carroll, chief education officer of The Shred Method, laid out a plan for achieving exactly that during his presentation at GrowCon 2024. It all comes down to changing habits, Carroll said.
“What if you could shift your cash flow just a bit, change your habits just microscopically, and begin to create real wealth outside of your business as well as inside?” Carroll asked the audience. “Nearly everyone could be mortgage free in just a few years, but it’s not necessarily to be debt free.”
Carroll discussed strategies for building wealth outside of the business at GrowCon 2024, the premier event for owners of bookkeeping, tax preparation, and advisory businesses. The 2024 edition of GrowCon was held at the South Bank Hotel in Jacksonville, Florida, on May 6 and 7.
The goal of GrowCon is to connect and celebrate accounting professionals, arm them with strategies to elevate their business, and set a course for a successful year at the business after the dust has settled on tax season. Early bird pricing for tickets to GrowCon 2025, to be held in Provo, Utah from May 5-7, 2025, are available online.
“I want you to get at least 1, maybe 2 ideas out of what I’m going to share with you today so that you can take it back and apply it to your life, your clients’ lives, your family and friends’ lives, and make their lives better,” Carroll said.
Here are some of the can’t miss strategies that Carroll shared in his presentation. If you’d like to listen to Carroll’s presentation, as well as 13 other presentations from GrowCon, you can purchase virtual recordings here.
Wealth Creation and Habits
As much as we like to think about financial problems as something that can be solved with advice, long term changes are only viable by fundamentally changing our habits, Carroll said.
Habits play a crucial role in our daily lives, he noted, and it’s no different when it comes to money. We develop certain habits with our paycheck each month: the government takes our taxes and we drop it into our checking account. We then pay our bills and use whatever is left over to spend on hobbies (in Carroll’s case, kayaking.)
To build wealth and assure our financial future, we have to shift our mindset from the present pleasures we enjoy toward what’s coming next. As business owners, it can be especially easy to just focus on the business as your main asset and not worry about what’s coming next. We’ll worry about all of that when we sell the business, right? That can be a dangerous pitfall, Carroll said.
“My challenge is that I have worked with business owners galore who believe they’re gonna sell their business, but they get to the end of their work life and there’s no one there to buy it from them,” he told the audience.
We all have four choices when our paycheck hits, Carroll said: 1. Pay for their expenses, 2. Eliminate debt, 3. Build wealth, or 4. “frolic” with it. People tend to only do options 1 and 4 because they’re habitual. But breaking that habit, and dedicating your money to outrunning your interest payments, is a much more beneficial financial strategy in the long term.
Carroll warned that “if you’re not selling the business, then you’re buying it.” Improving the value of your business comes with significant investments of time and income, so even if the asset is completely the property of the business owner, if the goal of the business isn’t to sell the business, it can weigh heavily on the entrepreneur.
The Liquidity Problem
Carroll said that most business owners who are struggling to build wealth don’t have an income problem, they have a liquidity problem. The solution, Carroll said, doesn’t require you to drastically change how you live your life.
One of the biggest contributors to the liquidity problem is debt, and specifically a mortgage. Carroll noted that that mortgages and interest rates are based on what the bank thinks the lender can afford to pay over the course of 30 years. The bank’s model for paying off a mortgage requires the homeowner to pay an exorbitant amount of interest over the life of the loan. The first 10 years of the mortgage payments are almost exclusively paying for the interest.
But you can skip months of payments (on a mortgage for example) by saving for awhile and then paying in a lump sum.
“We’re prepaying all that principal on the mortgage,” Carroll said.
Everyone could be out of debt within 3 to 7 years, Carroll said. However, because most homeowners don’t start paying the principal portion of the mortgage until the last 10 years of the loan, they have no liquidity to build wealth and pay down that interest. Moving before the loan is completed, or refinancing, sets that clock back.
As we mentioned before, when most people have extra money in their checking account, they are happy and want to spend that money on hobbies. Instead, Carroll recommends putting your income into a “Shred Account.” Everything that is left over in that account after the mortgage, car, and other debts are paid, is used to blast debt down. Carroll emphasized the power of paying off debt quickly and broke down several strategies for reducing debt quickly. Here are the four steps of the SHRED method:
- Paying Expenses
- Eliminating Debt
- Building Wealth
- Enjoyment
Key Components of the SHRED Method
Carroll recommends opening a Home Equity Line of Credit (HELOC) on the home as a “shred account”. The goal of the shred account is to build a large lump sum quickly to use to pay down high interest debts. It’s a simple interest vehicle, meaning the interest is calculated daily. So if a person borrows from their line of credit on the HELOC (which should be about 150% of their monthly net income), it allows them to pay more of their mortgage down, saving tens and even hundreds of thousands of dollars in interest.
“What most people will have is a significant amount of equity locked up in their home that they don’t have access to because they’re not using a HELOC in the most, strategic structural way,” he said.
Here are Carroll’s key suggestions to ensure the success of the SHRED Method:
- Early Lump Sum Payments: Accelerate your mortgage payoff, potentially within 3 to 7 years.
- HELOC Optimization: Use a Home Equity Line of Credit to maximize financial benefits.
- Mortgage Recasting: Reduce monthly payments without refinancing, freeing up cash flow for investment.
- Overfunded Cash Value Life Insurance Policies: Invest in these policies to emphasize liquidity and financial freedom within 3 to 10 years.
To learn more about the SHRED Method and to sign up, visit Carroll’s website.
Access Caroll’s Full Presentation (and the other 13 presentations) from GrowCon 2024
The tips shared in this article are truly the tip of the iceberg when it comes to the amount of game changing insights that presenters shared at GrowCon 2024. Each speaker shared valuable insights for running an accounting business, from building wealth, optimizing the day-to-day processes of the business, and beyond.
Fortunately, you can access the full collection of presentations virtually for just $197. Purchase the complete list of presentations at both days of GrowCon at this link.
And remember that GrowCon 2025 will be held from May 5 to 7 at the Utah Valley Convention Center. Marriott Provo will be the host hotel for the event.
To learn more and register for this can’t miss event for owners of accounting businesses, follow this link.
The lineup of speakers will include experts in tax planning, business development, and client advisory services. Check out highlights from previous GrowCons for free here.
Looking Ahead to 2025
Thank you to all of the speakers who shared their incredible insights at GrowCon 2024 in Jacksonville, Florida. We are extremely excited for GrowCon 2025 in Provo, Utah.
To learn more about how you can start your own accounting business, improve your services, or train your employees, call Universal Accounting at 435-344-2060. Or schedule a time to discuss your future online using this calendar:
