A Yale finance professor has read 50 popular books on personal finance. Here's what he says they're wrong

, , , Ramit Sethi, together these sorts of personal finance gurus have sold tens of millions of books and shaped popular understanding of what it means to be financially savvy. They are very influential, but are they really right?

Not always, if you ask an economist. For a recent NBER article, Yale finance professor James Choi did all entrepreneurs who want to manage their money wisely a favor and read the fifty best personal finance books according to Goodreads, comparing their recommendations to the consensus opinion of academic economists.

How did the gurus succeed? While the professors agree with the experts on many issues (like index funds being your best bet for investing), they also differ significantly on a handful of important issues.

1. Always save at least 10% of your income.

If there's one thing almost all personal savings gurus agree on, it's that you really, really should save more. And you were supposed to start yesterday. "Of the 45 books that offer savings advice, 32 stress the importance of starting to save right away, and 31 regale the reader with the power of compound interest," Choi reports. "28 books mention the need for everyone to prioritize building up an emergency savings buffer."

Since saving for emergencies is as uncontroversial as it is in personal finance, you might be surprised to learn that the rule of always saving a fixed amount is not not really endorsed by economists. Instead, the consensus view among academics is that you should invest in yourself (and your joy) when you're young and relatively poor, and increase your savings in middle age when you're hopefully earning. the, much more.

2. Use the snowball method to pay off your debts.

You don't need a PhD in economics to do the math on this one. Just about anyone can instantly see that paying off the debt with the highest interest rate will save you money, but Choi was surprised to find that many books advocated yet another approach.

The "snowball method", popularized by Dave Ramsay, advises you instead to first pay off the smallest debt until you reach a zero balance, then move on to the largest next small debt. "You need quick wins, otherwise you'll lose momentum and get discouraged...every time you cross a debt off the list, you get more energy and momentum," says Ramsay.

3. Opt for a fixed rate mortgage.

Choi's article devotes a lot of space to the question of whether you should go for a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM). There is no simple answer to this question, with borrowers needing to consider the current interest rate, inflation risk, refinancing costs and how long you are likely to stay in the home. But Choi concludes that gurus are generally more positive about FRMs than professional economists.

According to a classic economic model, "borrowers should generally prefer ARMs to FRMs, unless interest rates are low," notes Choi.

Why Economists Differ From Personal Finance Gurus

On the surface, it looks like you might not blame yourself for not contributing to your IRA at age 23 and should consider some basic math when deciding how much debt pay first. These are indeed useful pointers, but as several commentators have pointed out, the most profound lesson seems to be that popular authors have a much better understanding of how human beings behave than professors armed with complex formulas.

While the...