How does Brexit affect my finances?

Now is the time to start thinking about how Brexit will affect you and your wallet.

Brexit refers to the recent decision by U.K. voters to leave the European Union. While Europe is definitely impacted by the decision, so too is the U.S. In the immediate aftermath of the results of the vote, markets in the U.S. plunged.

However, there are more ways you'll see the impact of Brexit. It's important to note that some of these effects may not be known in the immediate future, but could develop in the long term and once the U.K. fully leaves the EU.

What is Brexit?

Brexit, short for Britain and exit, is the movement regarding the U.K.'s decision to formally withdraw as a member country of the EU. When the final votes were tallied, the "Leave" camp garnered 52 percent of the vote while the "Remain" side was at 48 percent.

Leading up to the vote, polls predicted a close finish, but in the days before, investors firmly believed the U.K. would ultimately remain. As that result became less likely overseas stock markets were rattled, and when Wall Street opened up a few hours later, the same occurred.

"Markets are still unsure how to react to the news of Brexit."

If you've glanced at your 401(K) or IRA lately, you've probably noticed some drops and subsequent gains. Markets are still unsure how to react to the news of Brexit, and in all likelihood, volatility will remain for the near future.

But there are other areas where you'll notice the effects of Brexit.

Mortgage rates

Mortgage rates are influenced in part by the benchmark rates the Federal Reserve sets. They were last increased in December 2015, and head into 2016, there was a general consensus that further hikes would occur in 2016.

Thus far, rates have not increased because growth of the U.S. economy has been weaker. Additionally, before the Brexit vote, Federal Reserve Board Chair Janet Yellen said global uncertainty was a factor for not increasing rates in June 2016.

Potential homebuyers can now take advantage of historically low mortgage rates. For the week ending July 7, 2016, rates for 30-year fixed rate mortgages averaged 3.47 percent. Marketwatch stated current rates are only 10 basis points higher than in November 2012, when rates were at an all-time low.

As such, if you're looking to buy a home, now could be the perfect time to start searching the real estate market. Because of lower mortgage rates, you'll end up saving money on your monthly payments, and eventually, over the life the loan.

If you already have a home, you may then want to consider refinancing in order to take advantage of the low rates. Doing so will also help you save money.

Stock markets

Markets will always react to global news. No one knows the full extent of Brexit, and because of the uncertainty, volatility will likely remain in the markets.

Everyone will have different levels of risk tolerance, but in times of uncertainty, it's good to remember the importance of having a diversified portfolio. The appropriate mix of stocks and bonds can help ensure you remain actively invested while keeping your risk tolerance at an appropriate level.

To ensure your portfolio is where it needs to be, you may want to consider speaking with a professional to discuss your investment strategy in further detail.

Flying Brexit is already lowering the cost of airfare.

Cheaper travel

If vacationing and traveling Europe has been on your bucket list for some time, now is the time to start actually making that dream a reality. As soon as it became clear Brexit was going to win, the British pound experienced the sharpest decline in nearly 31 years.

According to The Motley Fool, it's possible that over the next two years, the British economy might go through a recession. When a country's stock market struggles, so too does its currency.

As long as the U.S. dollar still remains strong, you'll be able to travel to not only the U.K., but other parts of Europe as well because the effects of Brexit might lead to subpar economic growth in other European countries.

The Washington Post noted how prices may even decline further as Europeans feel less inclined to travel to the U.S. Airlines would then need to offer discounts as a way to entice potential buyers to buy airfare.

Keep your eye on popular trip planners like Expedia and Kayak so you can snatch up a cheap airplane ticket when the opportunity arises.

The effects of Brexit are real. From your investment strategy to mortgage rates, it's important to see how your finances are impacted by global events.

Investment products and services are not FDIC insured, not insured by any federal government agency, not a deposit or bank obligation, not financial institution guaranteed, subject to investment risk, including potential principal loss. For more information about smart ways to manage your finances, contact Landmark Bank.

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