Now a few weeks have passed since the outcome of the EU referendum, the idea of a post EU Britain has started to settle in with many of us. Unfortunately, we are still none the wiser as to what this might look like. Whilst no constitutional changes are expected to take place for at least 2 years, the global economy has already felt several shocks following the result, and there is still much uncertainty over what is likely to happen going forward.
Since our “What Does Brexit Mean for Business” blog, there has been even more change and development in the economy and political spheres – with Theresa May becoming the Prime Minister, and Mark Carney (Governor of the Bank of England) anticipating some financial stimulus over the coming months, as well as keeping base interest rates at 0.5%, and hinting they may even reduce from their already historic lows.
That being said, at the moment there is still little certainty over government economic policy, and what the future may hold for individual’s finances. Below is a list of areas to consider in order to protect against potential future risks to your personal wealth:
1. Review expenditure
In times of uncertainty, it is always important to maintain control over your personal expenditure to ensure you have a “buffer” against any unforeseen circumstances. Things like unused gym memberships and mobile phone contracts can all add up to additional expenditure which may not be necessary.
2. Manage debt
Although base interest rates are unlikely to increase in the short term (but who knows!), as banks face changes to their lending abilities it is crucial to ensure you are paying competitive interest rates on any borrowings. You should also ensure that you have sufficient interest cover should rates go up, so you are not left struggling to make repayments.
The property market is usually a good sign of how wealthy people are feeling, with price rises typically a sign of a buoyant economy. During time of uncertainty, however, we may see people hold off on purchasing property until more is known about what the future will look like – especially whilst banks are unsure of their lending policies. This could lead to a reduction in prices as demand slows, especially if we see global investors pulling out of the UK. Whilst this is potentially good news for first time buyers, it could have negative consequences for those individuals with a large loan to value on their mortgages, and also those with a large buy-to-let property portfolio.
4. Household income
Consider how your household income is made up. With uncertainty in the labour market, having all of your income from one source could lead to difficulties. If you can develop other sources of income, or share the “bread winner” position within the household, this spreads your risk against any possible loss of income for whatever reason.
5. Review savings and pensions
Interest rates and market conditions can play a big part in the value of your savings or retirement fund. Speak to your financial advisor to ensure your investment strategies are still appropriate in the current conditions.
Take professional advice. The above points are a short guide to highlight areas you may wish to consider when reviewing your personal finances, and there will be many other areas for each individual to think about. We, along with your other professional advisors, can help with these. If there are any points that you would like to discuss, or, indeed, you want to use us as a sounding board, please do not hesitate to contact us.
By Luke Wiseman – Witney office