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What will Brexit mean for my finances?

The implications of Brexit


It is four days after we found out that the UK has voted to leave the European Union. Many of us are a bit anxious as to what this could mean for our personal finances. We attempt to demystify this:

What does the Brexit all mean?


Whilst the UK will likely not leave the EU for at least another two years from October it is difficult to predict what will happen between now and then. At this stage we can only discuss the consequences of what we know is already happening.

Market panic 


On Friday 24th June, once the result was known stock markets took a tumble as large institutional investors and some retail investors sought to take their money out of a perceived risky stock market and transfer their money elsewhere to safer havens. This will likely have resulted in the value of your index tracker funds, individual stocks and pension funds to go down.

How does this affect you? If you need access to your money now, for example to put down a deposit on a property or want to retire you might find that you won't have as much or enough money. However, if you do not need access to the cash right now then you are better to do nothing. Leave the money where it is and over the long term (I mean decades) the short term decline in your wealth will be no more. Do not join the panic and remember Warren Buffet's famous advice: be fearful when others are greedy and greedy when others are fearful.

Property and cash 


The likely fall out from the markets will make people and investors uneasy. As a result demand for property will fall leading to likely decreases in prices. For those that already have a property, this isn't a problem unless you were planning on selling it any time soon. In which case my advice is to wait if you can afford to. Bear in mind that those looking to sell property are probably also looking at buying property that will also have had a price decrease. 

For those that aren't on the property ladder the fall in prices may result in the ability to actually afford properties. The only issue is that bank lending will likely become tighter and deposits may have shrunk if they had been held within share investments.

Cash and bonds are likely to be unaffected and are still covered up to £75,000 by the financial conduct authority.

Job and opportunities 


Given the uncertainty many Companies will go on hiring freezes for the time being. It isn't a good idea to start looking for a new job at this point. It is probably worth making sure you are as valuable as possible to your own firm. Look to learn as many new skills as possible and try (if possible) to develop additional income streams on the side just in case the worst should happen.

Prices


Prices are likely to go up given the uncertainty. If the UK leaves the single market and is unable to negotiate a free trade agreement then it is likely that tariffs will be put onto UK exports to the EU. Likewise the UK will put tariffs on EU imports. This will more than likely result in an increase in prices on the supermarket, at the pumps and in store. Remember that you are never committed to buying these goods. You could opt for local produce and not imports and you could opt to take alternative forms of transport.

Exchange rates 


Exchange rates has seen the GBP fall to a 30 year low. This makes buying imported goods ever more expensive and conversely makes our exports cheaper. Having exports appear cheaper to other countries can actually help UK businesses as it is likely that demand for their products will rise.

Going abroad will likely be more expensive for UK citizens as the GBP will buy less foreign currency than previously. Bear this in mind when going abroad, alternatively consider a holiday in the UK.

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