Congratulations on your pregnancy! Have you thought about how you're going to pay for it? I know that seems like a harsh question but trust me you need to think about it. I'm not trying to bring you down, I just want to make sure you're financially prepared for the next phase of your life.
As a financial planner I see women go on maternity leave without a care in the world when it comes to their money because they're so preoccupied with diapers, nurseries and changing tables. They don't give a second thought as to how their family finances are going to change. So here it is, the question all mothers-to-be need to ask themselves...How are you going to budget when having a baby?
Do you know how much a baby costs?
I'm not talking about how much it costs to raise a child in Canada, which by the way is over $240,000 according to Canadian Living. I'm talking about how you are going to maintain your lifestyle without a paycheque. The truth is very often families are so overwhelmed with their little bundle of joy they completely forget about how they're going to pay for their bills when their soon-to-be little one arrives.
I could sit here all day and tell you how to cut expenses, explain what happens to your mortgage and how to handle credit card spending while on maternity leave, but those are text book answers. What you need is real life advice. I don't have kids but I know people who do and you know what they say: "It's not about what you know, it's about who you know".
Real life advice from a (soon to be) mother of two
Lyanne St. Jacques is a wife and mother of a two-year old boy. She lives in Montreal and she's currently pregnant with her second child, due in August. Planning for maternity leave is different the second time around says St. Jacques "This time will be easier because we know what to expect and we know it’s not as tough as people think."
How did you prepare financially for your maternity leave?
The first thing St. Jacques and her husband did was try to figure out how much her income would change during maternity leave. "The plan I took was for a full year and it paid 75% of my salary for the first 18 weeks, then 55% for the remainder of the leave. Knowing this, we made two budgets. One for 18 weeks with my new lowered income and then one for the remaining time with the lower amount."
You can obtain more information about Parental Leave on the Services Canada website.
Did you make any changes to your mortgage payments?
When (we) first found out I was pregnant, we were actually renting in a duplex. Three months (into my pregnancy) the landlord told us he needed the apartment for himself because he was getting divorced so we had no choice but to move.
We decided to buy a house, which wasn’t part of the budget plan for that year, but definitely an expense worth every penny. Using our new budget plan we quickly figured out how much we could afford on a mortgage and we bought based on that. We kept in mind that the lower income was only going to be temporary and so we maxed out on what we could afford at the time.
Did you change your credit card spending while on maternity leave?
Yes, but only in the later part of the leave. When we were down to 55%, we opted to only make minimum payments on our line of credit. We don’t carry balances on our credit cards so we didn’t have that to deal with.
How did you plan for the unexpected?
We’ve always put money aside from each pay into what we call “other” and “emergency” jars and these have always covered us. The “other” money is used for little things that come up like an oil change on the car or if we want to buy something that isn’t part of our usual budget. The “emergency” money is really kept for emergencies.
If you're looking for more ways to financially prepare for maternity leave check out Take These Five Steps to Secure Your Finances in 2015, it's full of tips on how to budget and pay down debt.