BiggerPockets Money Podcast - 233: How to Financially Plan for 2 Special Needs Family Members

Episode Date: September 20, 2021

Life can be challenging at times. When you think you’re in a stable spot, the universe tends to throw you one (or many) curveballs. In the realm of financial education, the smart early decisions we make can help alleviate the stress of these curveballs. This has happened almost to the tee for today’s guest, Karen Ferrero. Karen grew up in a small town to a middle-class family. She was a first-generation college graduate and worked throughout high school and college. She later took a job and began consulting in the tech world, which offered her a respectable salary. She got married and had two kids with her husband, but shortly after, her husband was paralyzed in a motorcycle accident. Not only that, her son was diagnosed with autism.  Now, Karen had to sell her house, find a new accessible one, take her son to therapy every day, and continue working her full-time job. This put her in a sizable debt hole, but through strategic debt payoff and intelligent investing, Karen has come out on top. She still has a very high-paying job, a loving family and some very, very profitable investment accounts for her children that she started decades ago. In This Episode We Cover How to plan for when life changes your course by force  The importance of having good insurance when you’re young  Why you should always take advantage of the 401(k) match when presented to you  Investing as early as you can to capitalize on massive gains  Why you should put education accounts in a trust The extra costs that come with taking care of special needs family members And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 233, where we chat with Karen Ferraro and talk about what happens when life throws you a curveball. We have a two-year-old and almost two-and-a-half-year-old and one-year-old. And my husband's hospitalized for about five months. I have to sell my home. I have to buy a new home. I have to make the new home accessible. I have to find child care. I have to find someone to take my son to therapy still.

Oh, and I have to keep working this whole time. Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my capeless wonder co-host, Scott Trench. Oh, wow. Thank you for the billowing introduction, Mindy. Always great to be here. I just snorted.

Scott and I are here to do something. Scott and I are here to make financial independence less scary. That's just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting or what curveballs life throws at you along the way. That's right. Whether you want to retire early and travel the world, going to make big time investments in assets like real estate, start your own business, or set up a large trust fund for a dependent, perhaps a disabled family member,

will help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Holy cow, Scott. Today's episode is so, so, so good. Karen started off life, happy go lucky, da-da-da-da-da-da-da. And then life threw her a giant curveball. And then another one. And today's episode is about dealing with those financial curveballs and being able to weather those storms. Yeah, I think I think her story has a ton of different of the these curveballs, as Mindy alluded to her, I guess, stated directly in there earlier. But yeah, I mean, Karen, Karen's been through a lot and her family's been through a lot. And what I think you'll

see out of this is, hey, proper financial preparation can make things a lot easier and might have made things a little bit easier for her in some of those stages. But her overwhelming grit, competence, ability, you know, her career, all those things helped her get through a lot those things and I think set her family up for success. And so I think she's a really shining success story here and that there's a lot to learn from the way she did do a lot of the things, especially early in her career, that I think we should all be cognizant of that, you know, because life can happen to us. We have a choice right now while things are good, if they are good for us, of course, at least, assuming that, to maybe make some preparations for those types

of things down the road. And so I think it's a really powerful episode. I think you'll learn a lot. I certainly did. And I really, really admire what she's done and what she's been through and how she's handled it. Yep. And her ability to look towards the future because she, she realizes that she does need to make some legacy plans and has taken steps to do that fairly easily. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make

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Karen Ferreiro, welcome to the Bigger Pockets Money podcast. I cannot wait to jump into your story today. Thank you. I'm really happy to be here, Mindy. So where does your journey with money begin? Yeah, I would say, you know, I grew up in a very small town, middle class, family and neither of my parents went to college. I was the first person my family to go to college. It's interesting that my father became disabled and my mom worked part-time. And so I really saw the

struggle with my mom as a working woman and trying to support the family while my father was disabled. And so that really made an impression upon me early in life that I had to stand on my own two feet and be independent and support myself. So I think that was, that's kind of how things started with money for me. Okay. And you said you're the first one that went to college. What did your financial position look like graduating high school? And then what did it look like in college?

Sure. I worked, we'll see, you know, my senior year in high school, I worked nights at the Illinois State Police to support myself and try to get to college. I got grants and loans and scholarships. My family didn't really have a college savings account for me. So I went the student loan route. I worked several jobs all through school. And I was an engineering student, and I did start my career in tech,

and my whole career has been in tech, which was lucrative and beneficial. So I was able to handle those student loans. But I really did put myself through school through scholarships. and loans and working. Awesome. And what kind of tech are we talking about? Were you a software engineer? I was electrical engineer and software engineer.

I started my career as a software engineer and developer. Awesome. And so what was kind of your position upon graduation? Did you have any debt at all? Or were you, what was your job? How did things go? I did. And it's interesting because I went to my father for advice.

I was offered a job. I was working as a software engineer while I was going to school. and they offered me a job before I graduated. And my father's advice was, take the money. It's good money, take it. You can finish school later because you're accumulating all this debt. So that's what I did. I traveled a lot and wasn't able to stay in school.

So I did drop out at that point in time. And I didn't get my degree later when my employer paid for it. And that afforded me the opportunity to pay down my students. student loans earlier. I think I had around 40K, maybe a little bit less. And yeah, I was able to pay that off early. So how do your, how does your early career progress? What are some of the big milestones following this? You know, you get your degree, you've got you pay off your debt. Where are you at, maybe 5, 10, whatever point you want to? Yeah, my career progressed from a, you know, software engineer through a project and program management. And, um,

I was in corporate IT for the first several years of my career, and then I pivoted to consulting. And I started consulting in the mid-90s with Netscape, a little browser company. If you all remember Netscape, I decided I wanted to work there, and it was like the best time of my life. I absolutely loved it. And I had been in consulting really ever since, ever since then. And in my 20s, and at this time my career, I had no, I wasn't married, I had no kids, I traveled a lot, and I spent a lot of money because I felt that the money was always there to be made. And, you know, I spent it on travel and handbags and shoes and all that silly stuff that you spend it on when you're in your 20s. and you don't have any other responsibilities.

Can you give us an idea of the income over this period and, you know, the amount you spent and whether you did any type of investing, maybe like 401k or stock options or those types of things? I did 401K. I did not max anything out. I didn't even max to meet the matching because I wanted more money in my paycheck at that time. I just didn't. It's not something that I did.

I learned that a lot later in life, unfortunately. and I didn't invest. I started investing maybe in the late 90s. I opened up an e-trade account, this was before I got married, and I just dabbled here and there. But I didn't do the smart things like take advantage of 401K or we had stock options.

So my stock options at Netscape I held on to and AOL bought us, and they were worth nothing after that, you know. So, yeah, I just, it took a while. It took a while before I really came around. I think I, you know, I read The Millionaire Next Door in the late 90s or around 2000, and that kind of started my shift, I guess you could say. But even then, I was still a spender.

So at the point of the shift, what was your financial position like? I was probably, if you include my mortgage, I was probably negative net worth to the tune of 200K. And what was your income at this point? My income was around, I want to say, 125. In the 90s? In about 2000. Wow.

Okay. That's not bad. And what's the debt comprised of? The debt would be mortgage, cars. Let me think. Mortgage in cars primarily. And credit card. A lot of credit card.

And did you have any assets against that? No. I mean, 401k, probably around 30K in my 401k. Okay. And how many years into your career are you at this point? Eight. Eight. So you're approaching 30?

Yes. Mm-hmm. Yeah. I'm about 30. I'm about 30 years old. Okay. I hear her saying, oh, I made so many mistakes. I also hear you saying, I have a $30,000 net worth at age 30.

Scott, we have to remember, we run with some pretty big money nerds. We don't run with real life circles. That's doing pretty good with $30,000 in your 401k. I might have said net worth. I meant $401K. $30,000 in your 401k at age 30. You were, for the time, you were doing awesome. Yeah.

I think, you know, hindsight is 2020. And I think if I could turn back the clock, I would have done things a lot better. Holy cow, would I have done a whole lot of things differently if I could turn back the clock. If you know how to do that, let me know. Right. Right. And then, you know, in my 30s, I think when things really changed for me, I guess you could say. So what changes? And is it a event or process after reading The Millionaire Next Door? Yeah. Well, you know, so the process began and I started, I started thinking, here's what I need to do. I upped up my 401k to, you know, to get the maximum matching. I started getting more serious. I'll pay myself first,

all those old things, but it was very small. It wasn't a big shift. It was very small. And then my husband and I got married. I was 31 years old. We got married in 2000. We immediately had kids, two kids, boom, boom. And then my, I did a couple things.

And I was really saving for my kids, right? I did all the things that I thought I was supposed to do. And I'll talk about why those were mistakes later. But I opened up B-Trade accounts when they were infants and just invested in stocks. And they were universal gift to minor. They were minor accounts. That's important. I opened up 529s because, of course, my kids are going to go to college.

And so this is the smart thing to do, right? I opened up 529s with College, Illinois, and I'll talk about why that was. a mistake later as well. When my older son was two, he was diagnosed with autism. My husband was a union iron worker, so he was making pretty good money. And we decided at that time he would quit working to be the stay-at-home dad, drive my son to his therapies every day, and my younger son was six months old. So I had a two-year-old and a six-month-old.

And so fast forward about five months. My husband was in a motorcycle accident, and he broke his neck. And unfortunately, he became paralyzed at that time. This is June of 2004. Okay. So he's 35, 36 years old. Again, we have a two-year-old and almost two-and-a-half-year-old and one-year-old. and my husband's hospitalized for about five months.

I have to sell my home. I have to buy a new home. I have to make the new home accessible. I have to find child care. I have to find someone to take my son to therapy still. Oh, and I have to keep working this whole time. Oh, my gosh. So that sounds like your stress level was through the roof.

Oh, for sure. Yeah, absolutely, 100%. So you had to sell the house. house in a time that you weren't planning on selling it. I'm sure that that wasn't a great experience. Well, oh yeah, this is important too. So when we decided my husband has been in the trades his whole entire life and we sat down and we talked about how we're going to make this work and that he would quit his job as an iron worker, but he was going to do like home remodeling and things on the side. So we got a home equity line of credit and he bought a work truck and all these tools and everything to do

his side business a couple months before the accident. So I had a mortgage. Now I had our second mortgage or our home equity line of credit. And yes, so that. So I, yeah, I mean, this is just a devastating turn of events, obviously, for a whole bunch of reasons with this. What is, I guess, your position in the month, you know, following, you know, the five months in the hospital with that?

What is the state of affairs? So, you know, we sold the home at a loss because of just all the investment in his remodeling business. We sold the home at a loss. And then when we moved, we bought a house near our families because I knew we'd need support. But that house, it was being built, but not completely finished, but it wasn't fully accessible. So I'd have spent additional money to make the home accessible, right? for a wheelchair and all of that. And so we were, it was pretty devastating financially because, as I said, I was a spender and we didn't have reserves and we took out the second line of credit

on the home for his business. And it was, it was a really bad situation financially. What I did at that time, over a period of time, I think some people, I don't know if, if they don't have the income or means, how they would have got through that without filing for bankruptcy, quite honestly. I did not. I went to a debt consolidation, and this was a couple years later, went to, it was called Nova Debt at the time. It's not called Navacore, and consolidated all my medical bills. There were a lot, credit card, everything else, and worked out payment plans, and I paid that off. And now I have perfect credit today, but I was able to,

avoid any kind of a bankruptcy situation. And what I've learned is there's forgiveness everywhere. And I think people have learned that like with COVID. COVID is really like shine to light on forgiveness and hardship. But you, you have to ask. You have to ask. And it's amazing how forgiving or flexible people can be if you just ask. Some people just don't know what's available and they don't ask.

So, well, let's walk through it. I mean, where you've, you've, you have this two and a half and one year old. You're coming out of a lot of hospital debt and that kind of stuff. How do you manage things in the interim and then afterwards? Do you have to hire someone to come in and watch the kids while you work? Or, you know, how does that work? Yes. I did, I did hire someone to come into the house and watch the kids.

We put a camera system in. I also hired a cab service, and my brother-in-law and different people took turns taking my son, my son with autism, to a therapy session every day. And we did have, like, people come into the home, like physical therapy and nursing staff and things probably for the first year that my husband was home after his accident. How much do you think it cost to rent the household with all these things in that period? $30,000. Oh my gosh. Yeah. And what happens, and does that all get it formed into debt that you have to then consolidate later? Is that kind of what we're talking about with the Novacore? Yes. Mm-hmm. 100%. That the medical, all the credit card, it was kind of all rolled in together, which was nice. It was one payment for me, it was just a load off my mind. Just, you know, mentally, it made it easy to just have that one payment. Absolutely. And what is kind of the financial position following your husband's return back to home?

Yes. Again, I had to liquidate the work truck and all of that kind of things. Really, the focus was not on finances at all. The focus was on what is capability. You know, I was worried about my son's progress with his autism and what his outcome is going to be. but also my husband. It was, you know, nobody really knows until you get home. And it was a long process. But that first year was, you know, he had a lot of occupational therapy and learning to do things again.

And I will say it did take time. But now, you know, fast forward all these years. It was several years later. He got his driver's license. He drives with hand controls. He does all the cooking and cleaning. Thank God, because I hate to clean the house. and he does all that and you know into the child care it took a while um during that time you know

i did outsource a lot of things and and that but the financial impact of that just accumulated over time and i would say that scott that was about three years probably the first three years and that makes perfect sense you know i'm i'm asking these questions because we're we're our finance podcast but yeah that's that that's the that makes sense and yeah there's no obviously there's like many more important things than that. And it sounds like for three years, you had to put them on hold to make sure that you could take care of your family and put all these pieces into place with these kinds of things.

And it does sound like, though, that things began to gradually improve for your family members during that period of time and that, you know, it was a process, but there was some late at the end of the tunnel and folks gotten too much better, think that much better over that period. Is that right? Yes.

Yeah. I mean, things are, you know, I mean, I wouldn't want him to be pure. paralyzed, but I think he is fully independent and we, you know, are functioning and yes, everything, everything is good. And like I said, I put the e-trade accounts and the 529s in place for the kids when they were babies. So that I didn't think about for a while. And we did get insurance, life insurance, and disability insurance right when we were first, had kids too. That was important because I'm probably overinsured, but insurance is never cheaper than when you're younger.

And my husband now is not insurable. So that's, you know, that I guess was one lesson learned, you know. I can always get more insurance on myself, but he is not insurable. Did you have insurance on him? We did. Yeah. Okay. Yeah. So did. So did? that pay for it was small no but the plan i mean so so fast forward um you know we we got through you know kind of all the hard stuff he relearned you know how to do the day-to-day things he got his driver's license and then we you know realize okay now we need to get our house in order again we've neglected this and we went i turned to nova debt which i said uh it's now navicor did the debt consolidation that off early. Again, I've been very blessed to have a career in tech that, you know,

it's just been, I'm just so grateful. We had good medical insurance as well, which I don't know what we would have done without it. That's really important. You had a great paying job. You had great health insurance. I remember the 90s and the 2000s. I don't remember when HMOs fell out of favor because there's not a ton of those now anymore. But getting anything paid was a nightmare. So having good health insurance is really, really important for situations such as this. There's a lot of kind of skeezy outfits out there that call themselves debt consolidation. But this one is a reputable company. How did you find them? Mindy, and that's why I wanted to mention it. Again, this was pre-COVID, if you remember.

So I think since COVID, a lot of kind of shady, a lot of kind of shaked. organizations have popped up. Novodot was around back then, and they have changed your name to Navakor. That's why I wanted to mention it because they've been around forever and they are truly legit. You have to be careful because people are going to take advantage, and there are a lot of scams out there, particularly since COVID, unfortunately. Yeah.

So Navicor, we will include a link to that in our show notes, which can be found at BiggerPockets.com slash money show. 233. And yeah, I definitely want to make sure that if you are listening and you need to do some debt consolidation, make sure you're going with a reputable company. Scott, we should really look into how to vet that because there are some really shady operations out there. Yeah, like I have no opinion of NaviCorps coming into this show or any of these consolidators with that. So I'm just learning here and that would be a good thing to study. And if anybody knows an expert, let's get them on the show. And we can talk about that.

as an option for folks. Oh, yeah, that's a good idea. Okay, and I'm going to post this question in the Facebook group when this show comes out and just ask, you know, how do you vet a debt consolidation company? Because it's, boy, there seems to be a lot of need for oversight in that field, and it seems like there just doesn't. For sure, for sure. Karen, you obviously can't plan for what happened to you and your family in this period

of time. but if you could go back and give advice to yourself in that in that period maybe when you're 30, 31, getting married and then thinking about starting the family, what would you say? Are there some things that you know, knowing what you know now you might have been able to do or protect other folks' families? And if they're in the event that the unfortunate happens and they have to go through something similar? Absolutely. And I'll say, you know, I just want to say 26% of adults in the U.S. are disabled or have some kind of a disdemeanor. So, and accidents happen all the time. So at some point in your life as an adult, you probably are going to become disabled or somebody in your family will, at least like short-term disability. I would say flexibility is key. So if I think back to what I do with for my kids, and this is, you know, I open up the e-trade accounts and I open them up as minor accounts, I would have changed them to trust. Now, my older son does have a special needs trust. My younger son does not.

My stepson did not. What happened, 90% of the portfolio is Apple purchased at a price of $4 in the year 2002. So I looked it up. So the gain on that is about, it's over 33,000 percent. Yeah. Yeah. So they're doing okay. My younger son knows the time value of money, and he knows that he's, he,

He doesn't have to. I don't want to work for the man, mom. I'm going to do my YouTube, and I'm just like, you are. But my stepson, he knew, like, when he turned 21, he cashed that out. It's gone. Had I have this in a trust, and we could have set that age at 25, 30, something else. You know, my younger son is a lot more mature. But, so that was a mistake to put it in as a minor account.

The other mistake I made was a 529. Hold on. Before we jump into the 529. Let's clarify again, the mistake that you made was not putting it into a trust. You just put it into a minor account, which is in their name. So when they turn 18, 21, they can just take all of it. Okay. So how old is your oldest son?

So my older son is 19. My younger son is 18. Okay. So 19 and 18. and they have Apple from 2002. Yes. From 2002 and 2003, a lot. Sorry, did you say one of them is already cashed out, or do you think that they're going to get?

So my stepson, when I got married, my stepson was 10. We did the same thing for him. He cashed out. He turned 21. I think like that day, that money was gone. I bought a car and I don't know. It's gone. My younger son, my younger son,

He does a lot of individual stocks. He picks his own stocks. He has from a very young age. He's really smart about it. And he's not a spender at all. He has a lot of good habits. My older son is 19. Like I said, he has autism.

He, on the spectrum, he's lower functioning. So he just became potty trained at 18. He doesn't communicate well. He's verbal, but doesn't communicate well. and he probably will never be independent. So the 529s, again, when my son was a baby, you have no way of knowing what their outcomes are going to be, that he was going to have autism or whatever.

So I bought the 529s, and I went with College of Illinois. We live in Illinois, but I did look at all the state plans, and College of Illinois is a prepaid plan, meaning you pay for so many semesters, and you can pay for a semester at a state school, or you can pay for a semester, semester to private college, and you pay the price at that time, so in 2003, you're locked into that price, and then when your child graduates, you've paid for ex-semesters. Now, my older son

is not going to go to college, ever. That money can only be used for tuition, right, or education expenses. And now my younger son sees this e-trade account. And, Doesn't want to work for the main. I mean, he doesn't, he's going to junior college now just because he wants to run cross-country. But he's not, I don't know. I mean, I've encouraged him to go to, you know, we can use it for a coding book camp. I am locked in. Now, can I get that money out?

They have 10 years to use it. So if he changes his mind 10 years and wants to go to a university, that money is there. I can transfer my older sons to my younger. I can do those things. I can take it out. Only I can take out what I've invested in. it in 2003, which sucks. You know what I mean? Not that gain the whole time soon. I mean, so, you know, hindsight,

I mean, of course I thought my kids were going to go to college and this was a great idea, but I could have invested that on my own Mindy and Scott and then so much further ahead and my kids could have, you know, my son could buy a house with it or he could go to college or he could do, like there's just so much more flexibility. I think, you know, in hindsight, the five-twineines are too bad. So what I'm hearing you say is what you would have done is either put the money into a trust that you could have a lot more control over and invest the money on on your children's behalf or invest it yourself in some other type of plan or some other type of investment that then you could have used the equity or cash flow from that to then fund the educations or give to your

children those types of things. Is that is that kind of yes absolutely. Now that's that's really interesting in saying, hey, there's one outcome that I can do with this account can really pigeonhole a lot of things. You know, I think it sparks a thought about like HSAs, for example, do they have a similar type of thing with that even though they're, you know, we've talked about them as such a powerful account. Is there a similar type of risk that you're running by having too much of your wealth in HSA with that?

That's a good question, Scott, because I know that it's only for medical expenses, but the definition of medical expenses is really broad. Like, Band-Aids are a medical expense, and contact solution is a medical expense. So you can buy a lot of things with your HSA money. It also grows tax-free. You can pull it out tax-free. And as you get older, you can still use it. I think when you get to 59 and a half, you can just pull it out for anything, right?

Yeah, that's true. So I think it's a little, it's a lot less restrictive than the five. 529 plan, but I also had no idea that the 529 plan was so restrictive. On the surface, it makes sense because you see college prices going up and up and up and up. And you buy them, you know, like you said, when he's a baby and you don't know. Yeah, it does depend on your plan. So college in Illinois, like I said, was prepaid. So you pay the price for a semester, either a private school or public school at that time. And that's what I did. So yes, they're transferable. I know the Yes, I have 10 years.

And yes, I know I can take it out and just recoup the original investment 20 years ago. I do know this. Better than nothing. But yeah, we're here to prevent people from making these same. And I mean, regardless of my son wasn't disabled, I mean, there's nothing to say that he would have wanted to go to college either, you know? Yeah. Right now, my daughter, my older daughter wants to and my younger daughter's like, nope, I'm not even going to work. I'm like, that's not how financial.

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Many promotions are available both in-store and online, though some may vary. Let me ask you this backing up as well. Is there anything, you know, would you have any advice around insurance or anything like that as well on those fronts going, you know, as you got married and had your kids? Absolutely. I mean, we did get insurance early, and I would say there, it's always going to be cheaper when you're younger. The longer you wait, the more expensive insurance is going to be. And I'm thankful we had the insurance that we had. I wish we had more.

But yes, and I've used policy genius. They're fantastic. Quote Wizard is good, too. Quote Wizard, I think is lending tree, but I've used policy genius, and they do all the work for you. and it's super, super easy to get additional policies for myself. With, as, you know, since you have a, when your son, your older son has autism with that, how do you handle insurance today with his situation? I'm not sure I understand the question how I handle it.

So we have guardianship of him. We have guardianship of him. And he's covered through my employer benefits through the age of 26. And then what happens after 26? That's a very good question. Because if you have guardianship, I thought legal guardianship meant something different with regards to insurance, although I only know enough to be dangerous. I don't know.

It does. And I should know this, but I'm not exactly sure. I'm not sure how much longer he can be covered, given that we do have legal guardianship of him. I haven't looked into that yet, unfortunately. Okay. He'll get Social Security and medical. care as well at some point.

Well, let's go back to the, I think we're, we picked up the story around three to five years following your husband's accident and you're beginning to consolidate your debt and, you know, things are, things are improving in the, and in your household and all that kind of stuff. How does the story progress from there, the financial journey? Yeah. So that's when I really started doing all the things. The Nova debt situation was humiliating.

I guess you could say. I'm a really private person and a lot of anxiety about coming on the podcast, but I think it's an opportunity to help people. Thank you. This has already, I think, been so helpful to a lot of people. I bet you a lot of people haven't thought about the possibility that something like what's happened to you guys could happen to them. There may be other folks that are experiencing parts of that,

and I think this is going to be really valuable. So thank you so much for coming on. That's when behaviors really changed. Things really clicked. That's when I started maxing out the 401K, not just to the match, but just maxing out everything. That's when I really clamped down on the spending and took a look at, I started tracking, just tracking. It's like when you track your calories and you're like, oh, crap, look at all what I'm eating.

How can I do that? Same thing with the spending. You know, you're tracking it and not really doing anything with it. It's just like tracking it. Oh, it's quite an eye-opener. And that's when things really changed around here in our household, I would say. And again, super fortunate to work for great companies that I have like Cisco and Box and Microsoft. And I know I'm very fortunate.

And so it was easier to dig out of that hole and kind of, you know, turn things around. So same question I asked earlier. Was this a process or an event that kind of changed things for your household? Was there an event that triggered it? How did that work? Or what was the change? Yeah, I think really the event was, I think a low was the Novita. And just conceding that I need help, I can't, I just need help getting out of the situation.

I'm not going to be able to do it by myself. And it was a process. After that, it was a process. And I think just seeing that, you know, it wasn't even like day over day or month over month, but year over year, getting out of the, that hole and making progress, it just kind of incented you to do more, you know, and start listening to podcasts, reading more books, doing all the things, leveraging the vehicles like the HSA.

That all came over time. It wasn't a single event. It was a learning process for me. And what did that look like for you? First of all, what year did you consolidate the debt? 2007. 2007-2008. How would you kind of pay your net worth around that time?

Probably negative 150K. Negative 150. And that's when you consolidate it. And from there, how do things kind of proceed over the next couple of years until, you know, what's kind of another milestone that you? Sure. You know, while we're paying off the Novodat, and I say me because my husband, if I pull out a spreadsheet or talk about finances,

as if he's not, he just glazes over. As I'm like paying off the debt consolidation, we, my husband's getting his driver's license. Now we need a vehicle with successful hand controls, which are like insanely expensive. And he needs a power wheelchair, which is insanely expensive. So we still have, we still have to buy the things, right, that we need. So it was very, very slow progress.

And then once the Novodat was paid off, and that took maybe two and a half, three years, then that's when things kind of really, really kicked in. So the spending, as far as the fund spending, right, the shopping and the trips, that stopped. But that was replaced with improvements to the home, accessible vehicles, power wheelchair, medical bills, right? So it took probably a good 10 years to really feel like now we're able to save. We're realizing we don't have any credit card debt. We don't have any car payments. So that's around 2015, 16, 17? Yes.

I would say 20, probably 2017. And so how are things at 20 and 20, I mean, now we're skipping over large swaths of time, so we'll come back and go over any of that. But how do things look at that point? what is the financial position around that milestone right so debt consolidation is gone we have the mortgage on the you know our primary mortgage we have three car payments um and small credit card debt that's usually paid off every month and what is kind of the what was kind of the goal at that point did did your financial goals or thought processes change at that point yes um they became

like the goals then became, I guess, more motivating because it wasn't just get out of this big debt hole, but it's pay off my car, pay off raise car. So something more, I guess, tangible, that's something you felt better about, that then we could move into our asset column, if you will. So that was the plan. And we did that, probably once a year we paid off each of the three cars. That takes us to 2020. I think we paid off my car and maybe in 2019. So all the cars are paid off. No credit card debt or very low credit card debt. It's monthly. Savings, you know, have a nice solid savings. And again, I'm maxing out 401K. I'm over 50, so I get the extra for the late bloomers that need to catch up. I'm doing that.

And so my, so here, here's the goal for me. The goal, and I'm a little obsessed about this now. It's, you know, I have, I have peers and I love them and they're, and we're so fortunate, and they're buying vacation homes and they're, you know, doing all this. My, I'm working for my son because he's never going to be independent, and I want him to have a good quality of life. And unfortunately, in this country, good care costs a lot of money. And so I'm, that's what I'm working for.

I'm not working for my retirement. I could retire today. I'm working so he has a good quality of life and he's well taken care of. And I don't know how much money that's going to take. So I'm a little obsessed about that. Well, look, I think that is an awesome goal. And I think that it's, it is tough that that's the reality of that. But I think we can help a lot of people, I think, by going

into that and saying like what are the uncertainties around that? What are some of the basic things that you've kind of discovered so far? You know, more is always better, but like how do you begin to approach that problem of setting up finances for a dependent? Like in your situation, I think that's a great topic if we can go into that and learn from you about what you're doing there. Yeah. So we set up the special needs trust.

And now any gifting that our families do, they should write, you know, instead of writing a check to my son. they write it to the trust. He'll have an able to... And how does that work? Can we just go to very, very basic? So that, why that particular instrument? How does that work?

What are the advantages there? And how do you... What are the... What comes with that? Yeah. I'm not an expert, but there are tax benefits to having it in trust. There's also, you know, how it's dispersed.

And the big one is the taxes. Right. And then it won't factor into his government benefits. So he's still able to be able to get full government benefits and social security and all that. And they won't look at that as an asset that he has, like his asset. It's a trust. So it's essentially a way to, it's similar to you can defer it or not pay taxes on it like a 401K. And then the disbursements, will they, will those be income to your son in the future? I believe so. Yes. can only be there used for certain things. So I have an able account for his like housing in that. And then this is used anything toward his care. So whether it be medical or clothing or anything that he needs for his care, we'll all come out of the trust.

And is his trust comprised of the same Apple stock from 2002? Or is that a separate e-trade account for him? No, it's all the same. It's all together now. And yes, and then there's also, we have a discover when the, if our family like gives him anything, there's a, I have a high yield savings account. It's a trust account and his special needs trust name that that's where that goes. So I haven't, I'm not touching. And to be clear, none of this will, none of this will, I guess, go into a factor until my husband and I pass away. So we're paying all of this financial care now, of course.

But this is like legacy, a legacy. Oh, okay. And do you manage the investments in this? I do. Again, I don't touch them, but I made the investments, you know, 20 years ago. And like I said, I love tech. It's what I know. And so, you know, it's Apple, it's Amazon, it's Microsoft, and they did really well.

And I didn't buy any for me, but I did for my kids, you know, for my boys. But yeah, it's just done extremely, extremely well. That's great. Did you buy Amazon way back then, too? Yes, not as much. It was like, it was heavy Apple, PayPal, eBay, yeah. Wow. But no, my son, starting when he was about eight or nine, he started making his own investments.

And he was super smart. So he has the EpiPen. He's like, mom, who makes the EpiPons? Is that Merck or Pfizer? I think we need to invest in Merk or Pfizer. And, you know, as a nine-year-old. And so he's picked some pretty good stocks, too. You know, like, roblox, you know, what the kids like.

But I let him, I let him pick his own stock. That's brilliant on his part. What are some of the expenses that go along with that, that, like, what does good quality of life and care look like? for someone like your son, how do you go about thinking through that and the cost of that? Of course. Right now, our school district pays for, you know, his education and his therapist and his one-on-one aides and everything. So we won't have to worry about that until he turns 22. He will need 24 by 7 care. He will need like supervision. And that's going to be probably the largest expense that in his housing.

Yeah, he just needs a lot of therapy. So just the day-to-day reinforcement of, you know, regular hygiene and how you clean up after yourself. And, you know, we cook with him a little bit, but it's not safe. You know, he'll never be able to be independent and be safe, I guess you could say. And how does one think through how much that might cost on an annual basis or something like that. Yeah. There's, there's, you know, I know I'm asking tough questions. I've just wondered if these are, you know. Yes. Well, so the short answer is, and for the, you know, if you don't have

means, I think there's always, you know, government programs. The problem with those are there, I think they're overcrowded. I think they're not realistic as far as how many people in the future are going to need that kind of support. And again, unfortunately in this country, it's, you know, the level of care really equates to dollars. So I think, you know, we're looking into different states, you know, where we could live and where the best quality of services are. It might not be in Illinois. Probably not in Illinois.

But, yeah, it just depends and it varies greatly. And so that's why I'm overinsured. and it's just I don't think you can estimate it, Scott. That's a tough one. No, absolutely. For someone, thank you for. For someone who's listening to this, where, you know, they might just be starting this journey.

Where can they start looking? Where did you start looking? For what specifically, Mindy? For legacy care and, you know, the, because not everybody's going to be able to go back at 2002 and invest in Apple. This is very, very important. I would say anybody who's going through any kind of a crossroads, please get professional advice and surround yourself with professional help.

So never, never, never make a decision under stress or duress. Never, never. And my go-to people, my family, great advice, you know, but they completely out of their element. to help me. You just, it's not a good outcome. Also, for a trust situation, make sure you get someone who specializes specifically in trust, if it's special needs trust, specifically special needs trust. Do not go to your family attorney because they're not, you could get well-intended, but misinformation, and it could really be harmful in the long run. You might not get the

asset protection that you think you're getting if it's not set up. properly. So who besides a family, it sounds like a family attorney who specializes in special needs. Is that, is that how I would describe this person or how would you articulate this, the professional you need? Right. Someone who, who is expert in setting up special needs trust. And would that be a lawyer or is a gay? No, it would be an attorney. For sure, it would be an attorney. You might also, so you might also have a financial advisor that also, that also, you know, focuses on legacy, gifting, and special needs or estate planning. And that could partner with, but I would say beyond just a typical estate planning attorney, a special needs trust attorney is best.

If you don't know where to turn for that, you can, if you have a local chapter of the Autism Society of America, every state has a chapter. You can contact them for resources or Easterseals. And they have resources and references they can pass on to you. This is phenomenal advice. Thank you. I think a lot of people are like going to be overwhelmed about even even where to begin looking for those recommendations with that. But that's a really good place I think to start that that search there. I think it's great advice. Like these are all huge high stakes decisions and you've got to be able to know not only do I want access here or here or here, but also which type of trust and how to set that up for my dependent on that.

Yeah, I did a quick Google search and just special needs trust and a bunch of things came up. So it looks like there is a lot of information online. If you find yourself in this position, you know, I think that's great advice. Never make a decision under stress or duress and talk to people who can help you make a smart decision, you know, and talk to, I will say that, you know, there's attorneys vary in level of competency and level of communication skills. So talk to a couple. if you talk to someone and they make you feel bad or you don't like the way they communicate,

find somebody else. Get somebody that you think is going to represent your interests well. How about this for another, I know if there are a lot of tough questions your way. So thank you for all this. But how do you make the balance, the decision between like where and when and the art of how much to contribute for personal retirement versus into your son's trust with these things? Like how did you handle that? And how do you think a framework for other people thinking about that might be?

Yeah. So my son's trust currently what is funded there right now. And normally a trust isn't funded until after death. This is important. Ours is just because he had the C-Trate account. And so we converted it from a minor account to a trust account. That's the only reason there's assets in it. But typically you wouldn't have assets in a trust account until after death.

my understanding. So I invested that 20 years ago, Scott, and let it ride. I never touched it. Never. And then I just max out my 401k for my retirement. But again, I'm just going to keep working as long as I can. And I'm letting that ride too. And I think that eventually I will use that. But I just max it out. I'll use that for retirement whenever I get around to retiring. And then my life, insurance will further fund my son's trust. I see. So you're not even, you're really thinking about it differently. You're just saying, I'm going to maximize my personal net worth as much as I can, and that will, that will go into the trust. And that's really the essence of the strategy. So that actually makes it very simple

in some ways around, around the approach there. Yeah. Okay. So that wasn't a tough question. But thank you. I wasn't aware of that context. No worry. Awesome. What else do you think we should be asking you about or that might be some important topics to touch on? Let's see. I think, well, I think for somebody just starting, you know, I took a while to get started with investing. I did pick single stocks myself and I got pretty lucky.

But, you know, I know we talk about, you know, when you invest and the fee for fee advisors and things like that. I would say, you know, start out, like, you know, take baby steps. incrementally get better. So I go with an Edward Jones or somebody that's going to have for fee and let them put everything in place, then you can transition everything away and manage things yourself. It's okay to get started, but just get started. I would say it took me a while and was later in life. And again, I'm fortunate that I was able to turn things around, but I wish I had started things sooner, I guess. I know you hear that all the time. I wish I invested sooner. I wish I invested sooner. I I wish I maxed my 401k sooner.

That time, you can't get it back. That's so powerful. You can't get that time back. I'm going to quote that. I think that that's the deal. Is time and compounding and rate of return and how much you put in, how early you do it? And then just the flexibility, just having the control and flexibility. Not, you know, most people aren't going to find themselves in a situation where they have, you know, in my situation.

It's quite rare. But everybody is going to face soon or later some kind of a hurdle and obstacle. And I just think that flexibility is key. Hey, Karen, what is your job right now? Yeah. I am a technical director at Microsoft. I have a team of technical specialists report to me in state and local government, and they focus on teams and intelligence.

So that's what I'm at. now. Well, thank you. That's, yeah, it sounds like an awesome career and it sounds like you're doing very well on the career front with all that kind of stuff and obviously have been very successful there. Well, let's move on to the famous four if we're feeling good about a lot of these things. We ready for that? I'm ready. Okay. Karen, what is your favorite finance book?

Okay. So my favorite, I don't know what's my favorite. The first one I started with, I think I mentioned Millionaire Nut's Door. That's kind of when, things started clicking, and that was maybe in the year 2000. But one I love that's recent is never split the difference by Chris Voss. I love that book, and I call it a finance book because really it's like the art of negotiation. It's negotiating so your life depends on it and how to negotiate like the price of buying a car. And I think it's just fantastic.

So that's my new favorite, I guess. Yeah, we actually had Chris Voss on the Bigger Pockets real estate show back in the I know this because I was the guest interviewee on that one. So I'll find the episode number here in a second here. But what was your biggest money mistake? Overspending and not maxing out my 401ks earlier. It's boring, but that's the answer. Yeah, we hear that a lot.

Scott, that was episode 260 of the Bigger Pockets real estate podcast. Oh, thank you. The Chris Voss episode. Karen, what is your best piece of advice for people who are just starting out? Yeah. Think about the flexibility. Like I said, don't get locked into something that is too restrictive, like a 529 or like a minor account where you just, it's too constraining.

Think about that flexibility and how you can control your money. Yeah, you're making a lifetime decision that is impacting your life and somebody else's with those types of things. You've got to have control or be committed with that. Don't make it under severe stress or duress. Get advisors to help you with those big decisions that sometimes can be overwhelming. What is your favorite joke to tell a parties? Okay.

All right. This one may feel a little dated. And I say, why didn't the Terminator upgrade to Windows 10? Well, I asked him and he said, I still love Vista, baby. That's awesome. That was fantastic. My husband was Microsoft certified for something for a long time.

I know all those jokes. That's an awesome joke. I haven't heard that one though. That's awesome. Okay, Karen, do you have anything that you want to promote? Where can people find out more about you? Okay. My website, Karen Ferrerow.com.

I'm at Twitter at Karen Furrow. and LinkedIn at Karen Ferreiro. And anybody who is going through a tough situation or wants some advice, either, you know, career advice getting into tech or going through some kind of a hard time, I am completely open. And you can contact me directly. Awesome. We'll link to those in the show notes here. Yeah, that's. At biggerpockets.com slash money show 233.

Yeah, that's awesome. That's a very generous offer. Thank you, Karen. This was really, really good. This was so helpful. I know there are people listening who are contemplating, balancing out financial independence with known medical expenses or known expenses outside of the little phi bubble. And I think you've given people a lot of things to think about.

I certainly learned a lot. And I'm sure you will hear me re referring to this episode in few. future episodes. Oh, you should listen to Karen Ferrerow episode 233 because she talks about special needs trusts and that's, I didn't even know that was something that existed. So thank you so much for sharing with us today. This was really, really great. Thank you. Yeah, thank you. And we will talk to you soon. Okay. Sounds good. Thank you so much. Thank you. Okay, that was Karen Ferreiro and holy cow, does she have an awesome story. I want to highlight the one thing she said, she said, if we didn't have the means to do this, I would have had to declare

bankruptcy. And unfortunately, in America where our health insurance is tied to our job, if you don't have really great health insurance and you have this big old curveball coming at you, you could be medically bankrupt, medical bill bankrupt. And I mean, her husband's medical medical bills easily in the hundreds of thousands of dollars. Her son's medical bills also easily in the hundreds of thousands of dollars. And to be able to weather this storm, this is why you strive to be financially independent. So things like this, curveballs like this, don't just completely derail your entire life forever. Yeah. No, I think financial independence, even if the worst happens and you're not, you know, life throws you a couple of curveballs that are going to set you back significantly.

It's better to have that, to have the assets and the income from what would have been financial independence to help weather those storms than to not have them. So financial independence, in addition to being a great end goal that can make your life really wonderful in a lot of ways, it also is in itself a big insurance, a big insurance fund. So it's worth pursuing for a number of reasons. Exactly. I, you know what, I'm going to highlight that, Scott. It's worth pursuing for a number of reasons.

It isn't just so you can quit your job. It's so that you don't have to always be focused on money. You can open up your mind and think about other things. Absolutely. Okay. Scott, we ran a little bit long today. So should we get out of here? Let's do it.

From episode 233 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen saying put on your cape and escape ape.