What You Need to Know About Budgeting for Maternity Leave

Prepping for a new baby’s arrival might kick your nesting instinct into high gear, as you make sure everything is just right before the big day. One thing to add to your new-baby to-do list is figuring out how to financially prepare for maternity leave if you’ll be taking time away from work.

Lauren Mochizuki, a nurse and budgeting expert at personal finance blog Casa Mochi, took time off from work for the births of both her children. Because she had only partial paid leave each time, she says a budget was critical in making sure money wasn’t a source of stress.

“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time,” Mochizuki says.

But the question “How do I budget for maternity leave?” is a big one. One thing’s for sure—the answer will be different for everyone, since not everyone’s leave or financial situation is the same. What matters most is taking action early to get a grip on your finances while there’s still time to plan.

Before you get caught up in the new-baby glow, here’s what you need to do to financially prepare for maternity leave:

1. Estimate how long you’ll need your maternity budget to last

To financially prepare for maternity leave, you need to know how long you plan to be away from work without pay.

The Family and Medical Leave Act (FMLA) allows eligible employees up to 12 weeks of job-protected, unpaid leave from work per year for certain family and medical reasons, including for the birth of a child. Some employers may also offer a period of paid leave for new parents.

The amount of unpaid maternity leave you take will determine the budget you’ll need while you’re away.

When estimating how long you’ll need your maternity budget to last, Mochizuki says to consider how much unpaid leave you plan to take based on your personal needs and budget. For example, you could find you’re not able to take the full period offered by FMLA after reviewing your expenses (more on that below) and how much you have in savings.

Even if your employer does offer paid maternity leave, you may decide to extend your time at home by supplementing your paid leave with unpaid time off, Mochizuki says.

Keep in mind that despite all of your budgeting for maternity leave, your health and the health of your baby may also influence how much unpaid time off you take and how long your maternity leave budget needs to stretch.

As you’re financially preparing for maternity leave, make sure your spouse or partner is also considering what benefits may be available to them through their employer. Together you should know what benefits are available for maternity or paternity leave, either paid or unpaid, and how to apply for them as you jointly navigate the budgeting for maternity leave process. You can then decide how to coordinate the amount of time each of you should take and when that leave should begin.

Contact your HR department to learn about your company’s maternity leave policy, how to apply for leave and whether there are any conditions you need to meet to qualify for leave. Ask if you’re able to leverage sick days, vacation days or short-term disability for paid maternity leave.

2. Babyproof your budget

When budgeting for maternity leave, make sure you review your current monthly budget to assess how budgeting for a new baby fits in.

In Mochizuki’s case, she and her husband added a category to save for maternity leave within their existing budget for household expenses (e.g., mortgage, utilities, groceries).

“We treated it as another emergency fund, meaning we had a goal of how much we wanted to save and we kept working and saving until we reached that goal,” Mochizuki says.

Figure out what new expenses might be added to your budget and which existing ones might reduce to financially prepare for maternity leave.

As you financially prepare for maternity leave, consider the following questions:

  • What new expenses need to be added to your budget? Diapers, for instance, can cost a family around $900 per year, according to the National Diaper Bank Network. You may also be spending money on formula, bottles, wipes, clothes and toys for your new one, all of which can increase your monthly budget. And don’t forget the cost of any new products or items that mom will need along the way. Running the numbers with a first-year baby costs calculator can help you accurately estimate your new expenses and help with financial planning for new parents.
  • Will any of your current spending be reduced while you’re on leave? As you think about the new expenses you’ll need to add when budgeting for maternity leave, don’t forget the ones you may be able to nix. For example, your budget may dip when it comes to commuting costs if you’re not driving or using public transit to get to work every day. If you have room in your budget for meals out or entertainment expenses, those may naturally be cut if you’re eating at home more often and taking it easy with the little one.

3. Tighten up the budget—then tighten some more

Once you’ve evaluated your budget, consider whether you can streamline it further as you financially prepare for maternity leave. This can help ease any loss of income associated with taking time off or counter the new expenses you’ve added to your maternity leave budget.

Becky Beach, founder of Mom Beach, a personal finance blog for moms, says that to make her maternity leave budget work—which included three months of unpaid leave—she and her husband got serious about reducing unnecessary expenses.

Find ways to reduce costs on bills like insurance and groceries to help save for maternity leave.

Cut existing costs

As you budget for maternity leave, go through your existing budget by each spending category.

“The best tip is to cut costs on things you don’t need, like subscriptions, movie streaming services, new clothes, eating out, date nights, etc.,” Beach says. “That money should be earmarked for your new baby’s food, clothes and diapers.”

Cutting out those discretionary “wants” is an obvious choice, but look more closely at other ways you could save. For example, could you negotiate a better deal on your car insurance or homeowner’s insurance? Can you better plan and prep for meals to save money on food costs? How about reducing your internet service package or refinancing your debt?

Find ways to earn

Something else to consider as you budget for maternity leave is how you could add income back into your budget if all or part of your leave is unpaid and you want to try and close some of the income gap. For example, before your maternity leave starts, you could turn selling unwanted household items into a side hustle you can do while working full time to bring in some extra cash and declutter before baby arrives.

Reduce new costs

As you save for maternity leave, also think about how you could reduce expenses associated with welcoming a new baby. Rather than buying brand-new furniture or clothing, for example, you could buy those things gently used from consignment shops, friends or relatives and online marketplaces. If someone is planning to throw a baby shower on your behalf, you could create a specific wish list of items you’d prefer to receive as gifts in order to offset costs.

4. Set a savings goal and give every dollar a purpose

When Beach and her husband saved for maternity leave, they set out to save $20,000 prior to their baby’s birth. They cut their spending, used coupons and lived frugally to make it happen.

In Beach’s case, they chose $20,000 since that’s what she would have earned over her three-month maternity leave, had she been working. You might use a similar guideline to choose a savings goal. If you’re receiving paid leave, you may strive to save enough to cover your new expenses.

Setting a savings goal and tracking expenses before the new baby arrives is an easy way to save for maternity leave.

As you make your plan to save for maternity leave, make sure to account for your loss of income and the new expenses in your maternity leave budget. Don’t forget to factor in any savings you already have set aside and plan to use to help you financially prepare for maternity leave.

Once you’ve come up with your savings target, consider dividing your maternity savings into different buckets, or categories, to help ensure the funds last as long as you need them to. This could also make it harder to overspend in any one category.

For instance, when saving for maternity leave, you may leverage buckets like:

  • Planned baby expenses
  • Unexpected baby costs or emergencies
  • Mother and baby healthcare

“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time.”

– Lauren Mochizuki, budgeting expert at Casa Mochi

Budgeting for maternity leave—and beyond

Once maternity leave ends, your budget will evolve again as your income changes and new baby-related expenses are introduced. As you prepare to go back to work, review your budget again and factor in any new costs. For example, in-home childcare or daycare may be something you have to account for, along with ongoing healthcare costs for new-baby checkups.

Then, schedule a regular date going forward to review your budget and expenses as your baby grows. You can do this once at the beginning or end of the month or every payday. Take a look at your income and expenses to see what has increased or decreased and what adjustments, if any, you need to make to keep your budget running smoothly.

Budgeting for maternity leave takes a little time and planning, but it’s well worth the effort. Knowing that your finances are in order lets you relax and enjoy making memories—instead of stressing over money.

The post What You Need to Know About Budgeting for Maternity Leave appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com

How a CFP Celebrates Her Money Wins

People may often imagine that when they reach their milestones, there will be fireworks and party buses along with a huge celebration. And while sometimes there are, most wins are simply small steps you take every day until one day you wake up where you visualized you would be. That is why it is important to celebrate it all — the ups, the downs, the wins, the steps forward, and sometimes even backward. Without awareness and reflection, you might miss out on celebrating how much progress you have made in your financial life. By acknowledging even the so-called small things, you can keep the momentum alive and feel good about yourself.

Here are some ways I celebrate my money wins, no matter how big or small:

Tell my family and friends.

By sharing my money wins and even challenges with my closest friends and family, it opens me up to receive the love and support that is needed to sustain the financial journey. I think because money is still a topic most do not feel comfortable talking about, getting vulnerable with close family and friends allows them to do so with me in return. That kind of give and receive is part of living an open, abundant life. If you’re comfortable, you can even share on social media about your wins, which could inspire others. Sharing your money goals and personal finance journey also helps you stay out of the “I am all alone” mindset, which is not true and can actually hold you back from receiving more in your financial life.

Pause and feel proud of myself.

There are so many specific times in my life where I felt my money wins viscerally and just paused to take a moment to feel proud of myself for doing it. Whether it was saving a certain amount of money, negotiating a specific compensation package, or changing a mindset pattern holding me back from living abundantly, I can recall the memories specifically and feel great about them and myself. I remember years ago when I sold my first business and received the payment in my bank account, I felt amazing to know that I actually did it. I had finally reached my financial goal. It was just a regular workday and I was alone doing my weekly money date. And I distinctly remember feeling all the excitement and joy knowing I had accomplished something I worked on for years. The irony is when we reach our financial goals such as buying a home, paying off our student debts, or reaching our cash cushion goal, there aren’t actually big fireworks. Instead, you feel a deep understanding within yourself that you finally reached a goal you may have been striving toward for years.

Remember I can keep doing what it takes.

When celebrating my money wins, it also reminds me that I have the power to do and create what I want in life. By using my real-life experiences of achieving something I have worked for, I am reminded that I can continue doing so to achieve whatever next financial goal I have. When I reached my cash cushion goal years ago, I remembered that I have the power to keep creating my financial life as I desire and have the discipline to save for my goals. These reminders are key because no matter where we start financially, we all have the power to create our lives as we want, and choose how we show up, behave, think and act with our money. We are not victims. When I feel that and know that in my being, I feel anything is possible and am able to stay in the positive, “I can,” mindset.

Buy something memorable to acknowledge my hard work and effort.

This does not always have to be something major but can even be something that you have been wanting for a significant amount of time. When I reached my own financial goal last year of making a certain amount of business revenue for the year, I decided with one of my larger incoming checks to my business, I would take a portion and buy myself a designer handbag I had wanted for a few years. It was a gift to myself that I could enjoy and remember my hard work to achieve it. But you don’t always have to spend a lot. I also treat myself to smaller things like a massage or treating my family or friends out to a nice dinner. I just try to take time to celebrate by enjoying something nice whether it is a material item or a nice experience with my loved ones.

Journaling my accomplishments.

Every year, I take time to reflect on my total accomplishments for the year by journaling them out. This activity is solely for me to remember all I have achieved and to feel good about my accomplishments. By reflecting, I am able to connect to the positive aspects and blessings in my life to acknowledge how incredible I am. We tend to focus on what we are lacking or what we are not. By doing this activity, you are shifting your mindset and balancing the scales in a sense.

It’s common to look internally and criticize ourselves. Our mind jumps to comparing, thinking, “I don’t have this or that or I didn’t do this or that” or even feeling like a failure. With that mindset, you can get stuck only focusing on what you are not and have not, instead of embracing all that you are and all that you have. Having an attitude of gratitude goes a long way, especially with money. So take time to celebrate and feel grateful for what you have and all that you have accomplished. I truly believe this will also help you continue to attract more in your life.

The post How a CFP Celebrates Her Money Wins appeared first on MintLife Blog.

Source: mint.intuit.com