COVID’s impact on the wealth gap in America

Assistant Entrepreneurship Professor Tim Michaelis in the Department of Management appeared on Fox-Chicago to discuss the US economy, COVID’s impact on the wealth gap and why stock market performance does not reflect kitchen table financial struggles.

A transcription of the interview follows:

Q: “When evaluating your financial bottom line, how often do you look at your 401K? Do most people consider a good day on Wall Street to be a good day for their own personal finances? NIU professor of management Tim Michaelis joins us this morning with a closer look at the disparity between what’s been historically a resilient Wall Street and a fragile Main Street. Hey good morning. We definitely appreciate your time.”

TM: “Thanks for having me on. It’s great.”

Q: “Well, the big board of the New York Stock Exchange, it changes moment to moment. But when it comes to the personal finances, you took a look at what were some of the more tangible numbers, like credit cards and mortgage payments. Tell us what you found.”

TM: “In general, I think we tend to overemphasize the stock market as a metric. But if you look at credit card debt and student debt, it’s the highest it’s ever been right now. The pandemic is definitely exasperating that. So looking at that and also the fact that only half of Americans are in the stock market…it seems kind of weird to use the stock market as the way to measure our performance for everybody when only half of the people have investments in the stock market.”

Q: “Very good point. We know alot of people have lost jobs, positions at work. Are you finding that Americans are getting better at doing more with less?”

TM: “Definitely. Any time a pandemic, something like this, happens where alot of resources are lost, people get really good at doing more with less. The big thing I try to teach my students and anyone I can talk to about the topic is try to keep these habits after we rebound. This year is looking pretty good. Try to keep being frugal if you can. When you get your stimulus check in this next windfall, try to pause before you actually use it. Think about what you really need to use it for. That’s probably the best advice I can give.”

Q: “There’s this thought that individuals do better, really do better, when the big companies are doing better. What’s your thought on that?”

TM: “Back to the other point, of course the stock market going up is good for everybody. But the fact that most people aren’t invested — it’s really hard to build wealth if you don’t have investments, especially in a capitalistic economy. You need capital to protect yourself as a hedge against inflation. So people right now who have their money in just a savings or a checking account, at the end of the year they’re going to lose 2 percent. And the people in the stock market that goes up on average they might gain 7 percent. So that wealth gap is there. I just think it’s trying to educate people on how to save more efficiently and how to actually get to invest and doing it responsibly.”

Q: “I want to circle back to a point you made earlier. What is your best advice for a more frugal approach to life and what’s an ‘okay’ splurge? I’m just asking for a friend.”

TM: “That’s a great point. Alot of people think frugality is all about living this really cheap life and it’s not the case at all. Best advice on living frugal is just learning how to do things for yourself: cooking, cleaning your own house, cutting your own grass, trying not to go out to restaurants all the time. But you make a really good point. You can go out and enjoy yourself. It’s just really hard to regulate it a little bit and just not do it a couple times a week or even a couple times a month. I use it as a way to reward my own self for just being frugal that week. I’ll try to keep my meals to just two-three dollars a piece instead of going out and spending $10.”

Q: “You gotta find that dollar taco Tuesday, right? That’s the deal you want. Thank you so much for joining us. We appreciate it. We certainly love hearing from you, NIU professor of management Tim Michaelis. Thank you for coming on.”

posted by M. De Jean, Director of Marketing, NIU Business

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