Whose rationality? Muddling through the messy emotional reality of financial decision-making

The public's financial security is vital to economic stability, with policy and practice efforts focused on developing financial literacy to reduce financial vulnerability. However, this approach fails to fully consider the emotional factors that influence the financial decision-making process. This study examines how emotions shape these decisions, drawing on the concept of 'muddling through' to understand the complex process to be navigated. Data are drawn from 78 in-depth interviews with consumers who were financially 'struggling and squeezed'. 'Integral' and 'incidental' emotions were influential both in assisting the decision-making process and in introducing biases that could lead to harm. Consumers were able to rationalize their decisions, even though they might not be economically optimal in the longer term. Muddling through theory is extended by explaining the role of emotions within it. New insights into the interaction between emotions that are 'integral' or 'incidental' to decision-making lead to policy and practice recommendations.