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S4-9: US Consumer Credit Rising, Finance in Mainstream Media & Planners vs. Advisors

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On this week's episode of Finance Explained, Meghan discussed the operation of a 529 Plan, how to save money on school photos, the WeWork bankruptcy and its implications for commercial real estate and banks more broadly. She also covered the differences between a financial planner and a financial advisor and the latest from the Fed on rising US consumer credit balances and delinquencies. Listen in its entirety, and check out the summary with related supporting resources below.

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Can I use a 529 Plan for a Child that is Not Legally Mine?

Meghan began by addressing a question about the use of a 529 Plan for a child who is not legally hers. She explained the basic operation of the plan and expressed hope that her explanation would provide an answer. She went on to detail the process of designating a beneficiary for a 529 plan, clarifying that the beneficiary can be any person chosen by the account holder, not just a child. The designated beneficiary's personal information, such as their birth date and social security number, must be provided.

Meghan emphasized that the account must be used by the designated beneficiary, and expenses must be demonstrated as qualified educational expenses for that beneficiary to maintain the tax efficiency of the plan. She also confirmed that a 529 plan can be used for a child that is not legally hers, as long as the account holder is the custodian of the account and can provide proof of qualified educational expenses.

Related Post: How Do Parents Pay for College?

How To Save Money on School Photos

In response to a question on the cost of school photos, Meghan discussed her experiences with the school photo provider at her kids' elementary school. She expressed her dissatisfaction with the service, citing numerous errors and high prices. Meghan also shared that while the company is one of the biggest in the industry, she feels it has become a mess since merging with another major photo company a few years ago and suggested that there may be more economical ways to get school photos taken.

WeWork, Trump, Sacklers Place Finance in Mainstream Media

Meghan discussed the WeWork bankruptcy and its impact on commercial real estate, which is causing issues for many banks due to the commercial real estate debt on their balance sheets which may need to be devalued or written down. She also mentioned the ongoing civil lawsuit against former President Trump for allegedly overstating the value of his real estate assets on financial statements.

Meghan noted the increasing presence of financial topics in mainstream media, with recent examples including documentaries and movies about financial drama. She emphasized the importance of financial literacy in understanding these stories as more complex issues beyond just the tabloid fodder.

Financial Planners vs. Advisors: Understanding the Differences

Meghan clarified the differences between a financial planner and a financial advisor. She explained that financial planners create a plan for clients to follow and are typically paid a lump sum or hourly rate. On the other hand, financial advisors are registered investment advisors who charge a percentage of the assets they manage. Meghan also emphasized the importance of understanding the fees and compensation structures of these professionals, as well as the roles they play in helping clients manage their finances.

Related Post: 10 Questions to Ask a Financial Advisor Before Hiring One

Consumer Credit Trends and Implications

Meghan discussed the recent information from the Federal Reserve about consumer credit, noting the high rates of consumer credit balances and rising delinquency rates for credit cards and auto loans. She expressed concern about the trend and highlighted that while mortgage delinquencies have not significantly increased, student loans and auto loans are seeing rising delinquencies and have both grown fastest since the 2008 debt bubble.

Meghan also pointed out rising foreclosures and bankruptcies but emphasized that they are still at relatively low levels. She outlined the potential economic implications of consumer credit contracting, particularly in the context of rising interest rates and inflation. Student loans don't yet show rising delinquencies since payments resumed in October and so far data is only through September.

Next Steps

Meghan is still collecting YOUR stories for her upcoming project to feature case studies on different family financial journies and encouraged participation from diverse backgrounds. She promised to keep the participants' identities anonymous and thanked those who have already submitted their stories. She also confirmed another live session next Wednesday at 9 am.

To catch all episodes of Finance Explained, be sure to visit the Finance Explained podcast home page and subscribe wherever you get your podcasts to never miss an episode. Have a question you'd like Meghan to answer on Finance Explained? Look for the question box in her Instagram stories every Tuesday night, or you can also now record a question for her to answer on the podcast. Keep your questions coming - they help all Family Finance Moms continue to build their financial literacy and make us all financially smarter!

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About Meghan

Meghan spent nearly a decade as a Financial Analyst, before spending the last 7+ as a SAHM to three little ones. She shares simple money tips for moms to help your family reach your financial goals by building a financial plan you can LIVE with! You can learn more about her background in finance, catch her daily on Instagram and Facebook, and her weekly live discussions in her community for Family Finance Moms.

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