| 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. |