Pregnancy and Motherhood

September 26, 2019

Budgeting Tips to Maximize Your Maternity Leave

There’s nothing more precious than those first few weeks home with your baby. Not only is it good bonding time together, but you’re trying to find your new normal on top of that with new routines, a healing body, and plenty of raging hormones from sleepless nights. We want to make the most of our time off, but also try to extend our time off as much as possible, but with some maternity leave or short-term disability claims, you may not have luxury for your family to your maximum time off of 12 weeks due to financial issues. In our house, I bring in 50%+ of the income from my regularly salary, and although my work has a great short-term disability policy that gives me 60% of my salary during my leave, that was only good until my doctor cleared me around six weeks post-delivery! Knowing I had to go back sooner than later since we couldn’t afford for me to take another six weeks unpaid under FMLA, we saved up as much money as we could to try to maximize our time together and make it last longer during unpaid times.

Buy In Bulk

Costco was seriously a life-saver for me on maternity leave. Even though you spend more upfront when shopping, I didn’t have to go to the store as often for high priced items, like meat and diapers, plus they were cheaper per portion, so we ultimately saved money in the long-run. I highly recommend having a bulk warehouse membership during this time in your life – the savings o diapers alone is totally worth it (Huggies at Target are $24.99 for 96 and Kirkland at Costco are $29.99 for 192!).

Set a Budget and Add 25%

I follow the rule in our house to always have 25% extra budgeted for anything JUST IN CASE! The same applies to maternity leave. There may be things you want to do, emergency blowout diapers needed, or just the occasional date night to get away from the stuffy house. These all add up, and having a little cushion room will not only allow you to maintain your lifestyle, but enjoy your maternity leave without stressing about each and every penny going out the door.

Know Exactly What Your Income Will Be

This is a tricky one – a lot of people don’t know how to calculate what their estimated income will be on maternity leave. If your employer has a policy other than 100% or 0% of your income for a leave policy, you’ll need to know approximately what is coming in to prevent yourself from running out of savings early. here is the formula I used to calculate mine:

CALCULATE YOUR TAX PERCENTAGES:

  1. Get your last 100% income pay stub.
  2. Locate your gross income (the income you make before taxes and deductions).
  3. Add up your tax-exempt deductions (medical, dental, vision, 401k, etc.) and subtract it from your gross income. This is your taxable income.
  4. Locate each of your taxed amounts (state, federal, medicare, and social security). Divide each tax total by your taxable income and multiple by 100. These are your tax percentages.

CALCULATE YOUR ESTIMATED INCOME:

  1. Multiple your gross income by your leave policy percentage (i.e. 60% of salary). This is your adjusted leave gross income.
  2. Subtract your tax-exempt deductions from your adjusted leave gross income. This is your taxable leave income.
  3. Multiple your tax percentages each by the taxable leave income, resulting in four tax numbers.
  4. Subtract the four tax numbers from your taxable leave income. This is your approximate leave income per pay period.

EXAMPLE:

I make $2500 gross income per pay period. I pay $200 per pay period in deductions. My taxable income = $2500 – $200 = $2300. I am charged $100 in state income tax, $50 in federal income tax, $25 in medicare and $10 in social security. ($100/$2300)*100 = 4.35%; ($50/$2300)*100 = 2.18%; ($25/$2300)*100 = 1.08%; ($10/$2300)*100 = .43%.

My maternity leave policy pays 60% of your income. $2500*60% = $1500. I still will pay $200 in deductions during my leave – $1500-$200 – $1300. My tax total = (4.35%*$1300)+(2.18%*$1300)+(1.08%*$1300)+(.43%*$1300) = $56.55+$28.34+$14.04+$5.59 = $104.52 is my total tax. My approximate leave income is $1300 – $104.52 = $1195.48 per pay period.

Don’t Make Big Purchases Before or During Leave

The biggest mistake I’ve seen many people do is purchase a house or a car right before or during their maternity leave. Although we all would love the extra room or upgraded amenities for this special time, avoiding these items is essential because you’re going to have labor and delivery bills, tight budgets, and other expenses during your leave, and don’t need new payments stressing you out. We had a small Chevrolet Sonic that I bought many years ago, and although it was in fair shape for its age, putting a car seat in and out of it was HORRIBLE, but instead of weighing our minds on a car payments during my leave, we opted to wait till after my leave was over to finally upgrade our ride, and I’m so glad we did.

Meal Prep To Reuse Ingredients

You don’t have to spend hours in the kitchen every Sunday preparing meals for the week, but take 30 minutes to sit down, collect your recipes for the week, and find meals that overlap in ingredients so that you can buy less and use more. I can’t count how many times I’ve had a recipe call for two cloves of garlic, and wasting the rest of the garlic, so plan for recipes that use ingredients more than once that you can use whole vegetables or items with instead of letting them go bad.

Evaluate Your Subscriptions

We spend a lot of auto-drafted money every month on subscriptions, so re-evaluate what you truly need during your time home. It’s great to have Hulu, Netflix, Amazon Prime and everything else, but most of these allow you to cancel and start any time, so take advantage of the opportunity to save a few bucks if you’re not going to use something as often. Canceling five subscriptions at $10 each will save you $50 a month!

Start Saving From Day One

The minute you find out you’re pregnant should be the minute you start savings. Understand how much you’ll need in savings for your entire maternity leave, and divide that by the number of pay checks you’re going to have from now until you are due. That is how much per pay period that you need to put in savings to have enough money for your leave. Does your husband want to take paternity leave or do you want to take extra leave time? Make sure to account for those potential income discrepancies when saving, plus your 25% extra!