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Straight Story: Financial independence

Economics editor Chris Farrell

TEXT OF STRAIGHT STORY

Tess Vigeland: Our economics editor Chris Farrell is here with the audio op-ed we call the Straight Story, and Chris, our theme for today, this Independence weekend, is financial independence. It is that time of year when a lot of students graduate from college, like your oldest son.

Chris Farrell: Yeah, and all I've got to say is how dare he?

Vigeland: Well, hopefully he's learned from dear old dad about how to deal financially. What words of money wisdom have you provided for him and might you have for today's graduates?

Farrell: Well Tess, would you like me to make a commencement address?

Vigeland: No.

Farrell: Oh.

Vigeland: I'm not going to give you that much time.

Farrell: Alright. Well, you know, I'd have to say nothing original. I think the best advice really is find what you love, pursue your passions and of course, my favorite: think like a stock.

Vigeland: I was with you until that last point. Maybe you've been doing this too long.

Farrell: Well, that may be true, but here's what I mean. Look: no one can pierce the fog in the future and you're a young person and you're thinking about jobs and careers. But, you know, you can't pierce the fog in the future when you're thinking about buying a stock or a mutual fund. So what do we tell people to do? To use the financial jargon, what's the relationship between the potential rewards and the potential risk? You've got to find what you love and pursue it. You don't ever want to abandon that search. But there was this famous commencement address by Steve Jobs of Apple and at the end he said, "Stay hungry, stay foolish" and I would add "think risk."

Vigeland: OK, well, let's talk practicalities then.

Farrell: Alright.

Vigeland: If you're graduating from school -- we're talking undergraduates at this point because graduates, I think, tend to have a little more focus and really know what they want to do; that's why they're going to law school and medical school or business school -- But if you're an undergraduate and you're just leaving school for the first time and perhaps you've actually never had to balance a checkbook, I mean all this stuff has been taken care of for you for a while -- maybe not. How do you get to the point where you feel comfortable managing your own money?

Farrell: Well, I think one of the important things is that you are young; you are not your parents. Where young people often get into trouble is they try to live the living standard of their parents rather than the living standard of the student. You don't want to take on credit card debt. You can make a lot of mistakes.

Vigeland: Amen.

Farrell: But if you don't take on credit card debt, the penalties are less. But when you're thinking about your job or your career, one of the reasons why I talk about thinking about risk is we get so many emails and calls from people who have taken on so much debt to pursue a career and it's clear that they didn't think about what's the downside. It doesn't mean that you don't take on the debt, it doesn't mean that you don't pursue that career, but it does mean if you're going to take on a lot of debt to pursue that dream, make that investment, what's the downside, and can you live with it?

Vigeland: OK. The Straight Story and perhaps an honorary degree from our own Chris Farrell.

Farrell: Thank you.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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