After my announcement that we are expecting a baby in March, I don’t want this blog to turn in to a mommy-blog (it may be a slight inevitability that things will move that direction, but I will resist as long as possible), but there are some financial things that should be worked out before the baby comes, and that is definitely something that I think fits in with this blog, so I will write about that…
In the ideal world, I would love to take a year (or more) off from my traditional job and take on the full time role of mum, but that’s probably not the best option for us. (And please don’t take that the wrong way, I don’t think that being a stay-at-home mum is an easy job, it sounds quite tough, but from what I’ve heard it can be one of the most rewarding “jobs” there is.)
My income accounts for about 75-80% of our household income right now. This hasn’t always been the case, but because my husband is currently doing some training to get the necessary certificates for the next step in his dream career, his income has definitely taken a hit lately. I foresee his income eventually being equal to mine, or at least very close, but until then, we have to plan as if we are in the current income scenario. I think that’s called worst case planning or something…
Because of this, we have had to think carefully and prepare financially for the arrival of baby. We are fortunate to live in Canada where we do have government subsidized maternity and parental leave, but the maximum benefit from that is much, much lower than my normal income, so even though it does help, it doesn’t stop us from having to plan and build up some funds to pay for me to take some time with baby.
(Of course, if my husband’s training goes well and he gets a job in his desired field, his income will go up, and all of this planning will have to be re-evaluated.)
Funnily enough, in the last couple months, there have been quite a few articles written about financial planning for baby, and making choices regarding maternity leave or being a stay-at-home mom.
- Maggie, at Northern Expenditure, just published this one, explaining how she came to be a stay-at-home mom and how that has affected their finances.
- Bridget, at Money After Graduation, has just come back from a self-funded maternity leave since she is self-employed and doesn’t actually qualify for the Canadian government funded maternity leave.
- Scott and Sarah, from Couple of Sense, discussed their plan for a 15 month maternity leave here.
(I’m sure there are others, but those are the ones that I have recently read.)
As usual, when presented with a financial problem or financial decision to be made, I turn to my spreadsheets…
I created 4 scenarios:
- I take the full 50 weeks of maternity & parental leave.
- I take 3/4 of the leave, and my husband takes 1/4.
- My husband and split the leave 50/50. (25 weeks each)
- I take the 15 weeks that are maternity (mother only), and my husband takes the full parental leave of 35 weeks.
There are many other in-between scenarios, but I stuck with these so I could see the differences and put a tentative plan in place.
Scenario #1: I take the full 50 weeks.
For this one, my income is basically quartered for a full year, and if we keep our expenses about the same as they are now, with a small buffer to add in baby related expenses, we will need to save over $55,000. We’ve already put away $10,000 in the “baby fund” (if you were ever wondering what that mystery line “other savings” was in my savings goals on each month’s financial update… Surprise! It was the baby fund…), but with only 4 month’s to go, that’s quite a bit to save each month. Probably not likely to get there.
Scenario #2: I take 3/4, my husband takes 1/4.
This scenario brings the savings requirement to about $45,000. Again, the monthly savings amount is unrealistic in the next 4 months.
Scenario #3: We split the leave 50/50.
This is the one that I feel is the most likely to be what we end up doing, though I’m not entirely sure how we are going to save the $32,000 required. To be fair, we already have $10,000. But it’s around $5200 to save each month. Unless we dramatically increase our incomes in the next 4 months, or get a lot of overtime, I’m not sure we will get there…
Scenario #4: I take 15 weeks, my husband takes the rest.
And this one is the one that is probably the easiest for us to actually make happen. It brings the total amount to save down to $23,000 and with the savings we already have, I’m pretty sure we can manage $3000 per month (if we don’t try to save for anything else).
|left to save:||$45,000||$35,000||$22,000||$13,000|
|amount to save per month:||$11,250||$8,750||$5,500||$3,250|
Conclusions & Likely Reality…
The reality of what will actually happen probably won’t be decided until it is actually happening… We have rainy day funds that we may be able to pull upon to increase what is currently “saved” in the baby fund, and we have other means of income as well… So, there is always a chance that we can make one of the less likely scenarios work. If we decrease our spending, change our retirement savings amounts temporarily, or get any other windfall/income… Or if my husband’s employment situation changes…
There are many variables that we can’t predict, but knowing that between now and baby’s due date we have to save aggressively to even make scenario #4 work, I’m hoping that will light a fire under us and we will work harder at spending less and saving more.
Am I missing anything in my scenarios? Which option do you think we should go for?