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Popular Personal Financial Advice versus the Professors
Report

Popular Personal Financial Advice versus the Professors

NBER, 2022


Editorial Rating

7

Qualities

  • Analytical
  • Scientific
  • Applicable

Recommendation

If you’re looking to put your finances in order, the plethora of available advice can be puzzling and contradictory. Tips in popular finance books are sometimes based on fallacies; economists’ recommendations, meanwhile, don’t take human psychology into account. To bring some order to the chaos, finance professor James J. Choi studied 50 best-selling personal finance books and compared their advice to that of academic economic models. Readers will need expertise to follow Choi’s analysis, but his conclusions can aid anyone in making rational choices about personal finances.

Take-Aways

  • Advice in popular personal finance books often differs from economists’ recommendations – sometimes radically.
  • Economists advise varying your savings rate across your life, saving the most when you’re earning the most.
  • Popular advice about paying down debt often makes more psychological than economic sense.

About the Author

James J. Choi is a professor of finance at the Yale School of Management.


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