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Popular Personal Financial Advice versus the Professors

James Choi

No 30395, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D14 D15 G11 G4 G5 (search for similar items in EconPapers)
Date: 2022-08
New Economics Papers: this item is included in nep-ban, nep-fle, nep-fmk and nep-hpe
Note: AG AP
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published as James J. Choi, 2022. "Popular Personal Financial Advice versus the Professors," Journal of Economic Perspectives, vol 36(4), pages 167-192.

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