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Popular Personal Financial Advice versus the Professors

Author

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  • James J. Choi

Abstract

I survey the advice given by the fifty most popular personal finance books and compare it to the prescriptions of normative academic economic models. Popular advice frequently departs from normative principles derived from economic theory, which should motivate new hypotheses about why households make the financial choices they do, as well as what financial choices households should make. Popular advice is sometimes driven by fallacies, but it tries to take into account the limited willpower individuals have to stick to a financial plan, and its recommended actions are often easily computable by ordinary individuals. I cover advice on savings rates, the advisability of being a wealthy hand-to-mouth consumer, asset allocation, non-mortgage debt management, simultaneous holding of high-interest debt and low-interest savings, and mortgage choices.

Suggested Citation

  • James J. Choi, 2022. "Popular Personal Financial Advice versus the Professors," NBER Working Papers 30395, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30395
    Note: AG AP
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    Cited by:

    1. Martin Cesnak & Andrej Cupak & Pirmin Fessler & Jan Klacso, 2025. "Heterogenous Impacts of Macroprudential Policies: Financial Advisors, Regulatory Caps, and Mortgage Risk," Working and Discussion Papers WP 3/2025, Research Department, National Bank of Slovakia.
    2. John Beshears & Ruofei Guo & David Laibson & Brigitte C. Madrian & James J. Choi, 2023. "Automatic Enrollment with a 12% Default Contribution Rate," NBER Working Papers 31601, National Bureau of Economic Research, Inc.
    3. Kashirina, A., 2024. "Factors influencing the choice of savings and investment instruments by generation Z: The experimental study using neuroequipment," Journal of the New Economic Association, New Economic Association, vol. 63(2), pages 144-167.
    4. Yang Bai & Shize Li & Jialu Shen, 2025. "Homeownership as Life Cycle Goldmine: Evidence from Macrohistory," Papers 2507.17624, arXiv.org.
    5. Felix Chopra & Christopher Roth & Johannes Wohlfart, 2025. "Home Price Expectations and Spending: Evidence from a Field Experiment," American Economic Review, American Economic Association, vol. 115(7), pages 2267-2305, July.
    6. Arie Sherman & Hila Axelrad & Guy Barokas, 2024. "On subjective well‐being and excess strategy to cope with financial‐scarcity problem," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2535-2547, June.
    7. Ioannis Petrakis & Georgios A. Panos, 2025. "Pension Policy and Personal Finance: Defined-Contribution Plans and Retirement Strategies in the United Kingdom," Working Papers 2025_06, Business School - Economics, University of Glasgow.
    8. Kappes, Heather Barry & Campbell, Rebecca & Ivchenko, Andriy, 2023. "Scarcity and predictability of income over time: experimental games as a way to study consumption smoothing," LSE Research Online Documents on Economics 119423, London School of Economics and Political Science, LSE Library.
    9. Mottola, Gary & Skimmyhorn, William & Valdes, Olivia, 2024. "How are veterans faring financially? Updates and new evidence from a national survey," Journal of Economics and Business, Elsevier, vol. 129(C).
    10. Oehler, Andreas & Horn, Matthias, 2024. "Does ChatGPT provide better advice than robo-advisors?," Finance Research Letters, Elsevier, vol. 60(C).

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G4 - Financial Economics - - Behavioral Finance
    • G5 - Financial Economics - - Household Finance

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