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Choi  \nWorking Paper 30395  \n[http://www.nber.org/papers/w30395](http://www.nber.org/papers/w30395)  \nNATIONAL BUREAU OF ECONOMIC RESEARCH  \n1050 Massachusetts Avenue  \nCambridge, MA 02138  \nAugust 2022, Revised October 2022  \nI thank John Campbell, Joao Cocco, Erik Hurst, Neale Mahoney, Nina Pavcnik, Tim Taylor, Heidi Williams, and seminar audiences at the Bank of Italy, Caltech, Cheung Kong Graduate School of Business, the Personal Finance Symposium at the University of Alabama at Birmingham, University of Leeds, and Yale for helpful comments. Rohan Angadi, Rob Brinkmann, and Vod Vilfort provided excellent research assistance through the Yale Herb Scarf Summer Research Opportunities in Economics program. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.  \nNBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.  \n© 2022 by James J. Choi. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.  \nPopular Personal Financial Advice versus the Professors James J. Choi  \nNBER Working Paper No. 30395 August 2022, Revised October 2022 JEL No. D14,D15,G11,G4,G5  \nABSTRACT  \nI 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.  \nJames J. Choi  \nYale School of Management  \n165 Whitney Avenue  \nP.O. Box 208200  \nNew Haven, CT 06520-8200  \nand NBER  \n[james.choi@yale.edu](james.choi@yale.edu)  \nA data appendix is available at [http://www.nber.org/data-appendix/w30395](http://www.nber.org/data-appendix/w30395)  \nMillions of people get financial advice from non-economists. Robert Kiyosaki’s book Rich Dad Poor Dad has sold 32 million copies since 1997 (Lisa 2021) . Dave Ramsey’s book Total Money Makeover has sold 1.5 million copies since 2013 (NPD 2020), and his website reports that his radio show attracts 18 million listeners per week. Authors like these may be more influential than economists are. Chopra (2021) finds that exposure to Dave Ramsey’s radio show, which promotes high saving rates, reduces household retail spending tracked by the Nielsen Homescan panel by at least 5.4% .  \nWhat advice are popular authors giving, and how does it compare to the prescriptions of economists’ normative models? In this article, I survey the advice given by the 50 most popular personal finance books (listed in Appendix Table 1), as ranked by the website Goodreads in May 2019. Three of the books contain no advice on the topics I focus on, resulting in a final sample of 47 books. Table 1 summarizes—with some oversimplification—the consensus advice of popular authors and the corresponding advice from benchmark academic theories. The upshot is that popular advice often deviates from economists’ advice.  \nUnderstanding popular advice is interesting for several reasons. First, popular advice may help us interp","cbCain38T9i1GwHK","https://ap.wps.com/l/cbCain38T9i1GwHK","pdf",517049,31,"English","# Abstract\n## Advice sources and comparison\n## Why popular advice diverges\n## Topics covered in the survey","[{\"question\":\"What does the paper compare, and what is the main finding?\",\"answer\":\"It compares advice from the 50 most popular personal finance books with prescriptions from normative academic economic models. The paper finds that popular advice often deviates from economists’ recommendations.\"},{\"question\":\"Why might popular personal finance advice differ from economic theory?\",\"answer\":\"One emphasized reason is that popular advice accounts for limited willpower and behavioral constraints when sticking to a financial plan. The paper also considers the possibility that popular advice contains normative insights economists may have overlooked.\"},{\"question\":\"Which personal finance topics does the survey cover?\",\"answer\":\"The survey covers guidance on savings rates, the advisability of being a wealthy hand-to-mouth consumer, asset allocation, non-mortgage debt management, managing high-interest debt alongside low-interest savings, and mortgage choices.\"}]","Popular Personal Financial Advice versus the Professors | PDF",1788559665,78]