Suze Orman, Dave Ramsay, Robert Kiyosaki, Ramit Sethi--together these sorts of personal finance gurus have sold tens of millions of books and shaped the popular understanding of what it means to be financially sensible. They're vastly influential, but are they actually right

Not always, if you ask an economist. For a recent NBER paper, Yale finance professor James Choi did every entrepreneur who wants to manage their money rationally a favor. Choi read the top 500 personal finance books according to Goodreads, comparing their recommendations to the consensus opinion from academic economists. 

How well did the gurus do? While the professors agree with the pundits on a lot of questions (like index funds being your best bet for investing), they also differ significantly in a handful of important questions. 

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

If there is one thing that almost all personal savings gurus agree on, it's that you really, really should be saving more. And you needed to start yesterday. "Of the 45 books that offer some sort of savings advice, 32 stress the importance of starting to save immediately, and 31 regale the reader about the power of compound interest," reports Choi. "Twenty-eight books mention the need for everybody to prioritize building an emergency savings buffer." 

Given that saving for an emergency is as uncontroversial as it comes in the realm of personal finance, it might surprise you to learn that the "always save a set amount" rule isn't actually endorsed by economists. Instead, the consensus opinion among academics is that you should invest in yourself (and your joy) when you're young and relatively poor, and ramp up savings in middle age when you're hopefully making much more. 

2. Use the snowball method to pay down debt. 

It doesn't take 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 first will save you money, but Choi was surprised to find that many books still advocated another approach. 

The "snowball method," popularized by Dave Ramsay, instead advises you pay off the smallest debt first until you get to a zero balance and then move on to the next smallest debt. "You need some quick wins or you will lose steam and get discouraged ... every time you cross a debt off the list, you get more energy and momentum," Ramsay explains.  

3. Opt for a fixed rate mortgage. 

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

One classic economics model finds "borrowers should generally prefer ARMs over FRMs unless interest rates are low," Choi notes. 

Why economists differ from personal finance gurus 

On the surface here, the takeaway seems to be that maybe you shouldn't beat yourself up for not contributing to your IRA when you're 23 and that you should heed basic math when deciding which debt to pay off first. Those are indeed helpful pointers, but as several commentators have pointed out, the deeper lesson seems to be that popular authors have a much better grasp on the ways actual human beings behave than professors armed with complex formulas. 

While the advice of the Suze Ormans and Ramit Sethis of this world may not be mathematically ideal in every instance, it does an excellent job of taking into account people's laziness, self-delusions, and psychological quirks. Saving 10 percent of your income straight out of college might not make economic sense, but it does take seriously how terrible people are at changing their habits once they're set. The snowball method is batty from a mathematical perspective but it makes perfect sense from a motivational one. 

"Personal-finance bestsellers succeed by blending theory and psychology in a way that takes human nature seriously," The Atlantic's Derek Thimpson points out, but also warns that "those who spend a lifetime delaying gratification may one day find themselves rich in savings but poor in memories, having sacrificed too much joy at the altar of compounding interest."

Which is a good summation of the overall, but less so for most entrepreneurs. Math is powerful but so is psychology. The best personal finance strategy is likely the one that's closest to the mathematical ideal that you can actually carry out in real life.