Tim Michaelis, PhD is an Assistant Professor of Entrepreneurship at Northern Illinois University. He specializes in frugality and has some great advice on stretching your money, especially during COVID-19.

Tips from Tim:

Financial advice has been the same for the last 50 years. Experts on using money recommend focusing on the following, in order:

1. Cover your necessities (food, water, health)
2. Pay down debt
3. Build emergency fund
4. Invest the rest

Focusing on the categories and advice above, I recommend the following for those looking to get more from less during this difficult time:

Streamline spending on necessities

Food can be one of your family’s biggest expenses. Some simple and effective resources to reduce this expense are:

1. Reddit.com/r/eatcheapandhealthy
2. Free eBook on recipes / eating on $4 a day, https://www.leannebrown.com/cookbooks/

Now is also a good time to re-evaluate all of your subscriptions and cancel the ones you don’t need. I always recommend cutting cable and alternating month to month between different streaming services (Netflix, Hulu, Disney+, etc.)

Pay down debts (high interest debt first)

Ask all people you owe money if you can lower the interest rate or delay payment without penalty on your loans. Banks and other financial institutions are very worried about losing cash flow right now and are much more willing to work with customers to renegotiate their payment terms. Some of the largest sources of debt are car loans, mortgages, and student loans for the average American. Call your bank to reduce your interest rate or postpone your payment. The worst that can happen is they say no, but recent evidence suggests that they are very worried about defaults (i.e., individuals not paying any of their loans back). So give it a shot!

• Car loan –  ask for delayed payments or a reduced payment.
• Car insurance – I reduced my coverage through GEICO since I’m not driving to save $100
• Credit cards – Ask the bank for lower interest rates
• Mortgage/rent – ask about postponing payment, almost all mortgage companies are allowing delayed payments due to Covid-19
• Utilities – ask for delayed payments

Setup an emergency fund

Next, if you don’t have an emergency fund, 3-to-6 months of expenses, start one. Open a high yield savings account and put your cash in it. I personally use Alliant, which currently gives 1.35%. You want to make sure you’re protected from the next emergency situation. This step is very important in personal finance.

Invest the rest

I recommend that if you have the time to invest and the money to do so, reconsider putting your money in the stock market and consider helping local small businesses during Covid-19 instead:

1. Frequent your local restaurants for takeout or delivery
2. Buy gift cards to help local businesses with cash flow
3. If you’re stocked up, buy food for other people in need
4. Restock local food pantries, that are running dangerously low
5. Buy food for an elderly neighbor or nursing home
6. Or anything else you feel is right during this time

However, if you do want to invest, make sure you are going to leave your money in for the long term (minimum 5-7 years). I recommend buying VTSAX, the Vanguard Total Stock Index which is a low cost (expense ratio = .04%) fund that is diversified with many individual stocks (Apple, Google, Johnson and Johnson, Berkshire Hathaway, etc.). I personally invest in VTSAX.

That’s it!

Good luck and remember to treat people with empathy, we will all gets through this tough time!

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