Whether Brexit is good, bad or ugly, now’s a good time to get your finances ready for whatever may come your way
It's always all over the news, but as the talks have continued and debates have raged on, a big date has crept up. We're now one year away from Brexit Day.
Whatever your political preferences, one thing is for certain: no one can be 100% sure what impact it will have on our day-to-day lives. Whenever times are uncertain in the wider economy, it's always a good idea to take a look at your own finances and make sure they're in good shape. This means that whatever happens (a fresh new era or the end of the world) you'll have a solid financial grounding to see you through.
So, what might happen and how can you prepare?
Build a savings Brexit buffer
All separations risk a messy beginning, even if the two parties end up as good friends. We've already seen a few wobbles, such as the immediate fall in the value of the pound. But once we leave it’s possible that could mean we have a few more months of financial anxiety or it could even mean we fall into a period of recession.
The best way to deal with any financial upheaval is to have a savings buffer in place – and that’s good advice even when there isn’t a potential economic shock on the horizon.
With a little under a year to prepare, you have plenty of time to build a buffer that will help you get through any economic fall-out. Check out our guide to building good savings habits to get started.
Interest rates could rise
Okay, this one isn’t so much caused by Brexit but rather it’s likely to happen at the same time as Brexit. The Bank of England has been dropping some pretty strong hints that rates are going to rise over the next months and years, and it’s sensible to take them seriously.
If you’re on a standard variable rate mortgage then it could be a good idea to look at switching to a cheaper rate or even fixing so you have certainty. Online mortgage broker Habito revealed in December last year that its average customer who switches from a standard variable rate to a fixed rate saves £264.54 on their mortgage per month.
That is a heck of a saving and a potential Brexit buffer in one.
If you already have a credit card, providers could increase the rate of interest you pay on cards you already have. But there are lots of rules surrounding when they can do this. Providers can't change your terms if you’ve had the card for under 12 months and they can’t change it constantly. If your provider does put your rates up, they have to notify you first so you can close the account and pay off the balance at the original rate. Any fixed-rate loan repayments shouldn’t be affected by a hike. However, any new loans you take out may be more expensive.
If you’re worried about the cost of debt then now could be a useful time to get it under control ahead of Brexit Day. We’ve written a guide on getting your debts in check in 2018
You may dip into the red
A no-deal Brexit where Britain and the EU separate without any trading agreements in place particularly risks disruption and a hike in the costs of imported food and other items. Again, that’s probably not going to happen but it’s sensible to prepare for the worst while hoping for the best.
One possible outcome of higher prices and financial disruption is that more people will find themselves slipping into their overdraft, particularly if they are already regularly in the red.
If you think that’s a risk for you then it’s incredibly important to have the right current account. The website moneyfacts analysed the costs of overdraft charges and found that some accounts charge several times as much as others for the same-sized overdraft.
That means it’s vital you find the cheapest one for your borrowing needs. Many best buy tables on comparison sites will show ‘best for overdraft’ current accounts, for example. Take the time to read around so you know you’re switching to the best deal for you. And if you find yourself struggling, and regularly slipping into the red, then there's lots of help available from organisations like The Money Charity or StepChange.
Savings rates could rise
If the Bank of England does hike the base rate then that will at least filter through to savers and hopefully boost the meagre returns they have been seeing for years now. Post-Brexit, that is going to be good news for anyone who relies on their savings for an income or who wants to make sure they are beating inflation.
However, don’t rely on your bank simply hiking the rate of the account you already use. To get the best savings rate it’s important to regularly check what’s out there and switch your savings to take advantage of any better deals in the market.
It could make imported goods pricier
There’s a good chance that the pound will plunge for a period post-Brexit, as the markets try to work out how strong the British economy is. So, items bought from Europe or America could rise in price as the pound falls against the dollar and euro.
If you do find yourself regularly buying items from abroad, you can shield yourself from that kind of price spike by stocking up a few extra items here and there and building a bit of a stockpile. French wine, for example, might climb in price.
It might disrupt your travel plans
We all hope that politicians will make agreements that keep us in our Open Sky arrangements with Europe, allowing our planes and theirs to travel easily between countries.
However, there have been warnings that a no-deal outcome could mean planes are grounded by red-tape until an agreement is reached. It’s unlikely to happen but, just in case Brexit does disrupt your travel arrangements, make sure you take out travel insurance as soon as you book any holidays for 2019.
Flight prices and the cost of currency could also rise post-Brexit, so it’s really worth shopping around for the best deals available.