Hello Mommy & Daddy
Posted by Gail | Filed under Money & Family
It funny how your definition of yourself changes when you add “Mommy” or “Daddy” to your list of titles. But the transition to parenthood, while the most natural thing in the world, isn’t always smooth. When I first found out I was pregnant, I was overjoyed. As my belly grew so did my sense of dependence on my husband (I didn’t like that) and my worry about how I would manage to balance two roles: professional woman and mother. Would I go back to work? (This really wasn’t a big question for me. Writing keeps me sane.) Who would look after my little princess? How would we live through my maternity period on just one income? (I’m self-employed so I wasn’t entitled to maternity benefits.) In the end, it all worked out fine. But it wasn’t luck. It was because I had a plan.
There’s nothing like practicing to live on less to let you see how you’ll cope financially once Darling Daughter or Sonny Boy arrives. During pregnancy, try living on one income. Put the other income into savings or use it to reduce your high-cost debt. If you’re flying solo into motherhood, now’s the time to start planning how you’ll work baby’s needs into your budget. Set aside the money you’ll be spending on baby food, diapers, and all the rest.
Maternity leave alone will bring a cash flow crunch since Employment Insurance pays only a small percentage of what many people have been earning. And for you self-employed cats like me, signing up for EI can be an expensive option if you’re planning to have just one child. Back when I did it, EI wasn’t even an option so I had to stockpile money to have something to live on during my mat leave.
Think about a delay in taking the deduction for your last RRSP contribution. Hold on to the deduction until you return to full-time work and you will be back to a higher marginal tax rate so your deduction will be worth more.
It’s not unusual for retirement savings to take a back seat to educational savings and home ownership once two become three. While you may have to reduce the amount you put away in acknowledgement of the increases in expenses and the shifts in your priorities, you shouldn’t give up on your retirement plan completely. Even a small contribution each year will compound significantly, and it’ll mean you won’t have to turn to your children for support, just when they’re having their babies.
If your financial reality has included the active use of credit, it’s time to think about what kind of credit you’re using and what it’s costing you. With a reduced income, a credit card that charges 22% in interest is not the answer to your cash flow crunch. Apply for a cheaper card and transfer your balance. Also think about overdraft protection… (I’m not a fan of OD, but sometimes it’s better than the NSF alternative). While a product of last resort, overdraft will at least eliminate the bruises to a your credit history that comes with bounced cheques and missed payments.
The arrival of a child brings many added responsibilities, including making sure your child will be cared for in the event of a catastrophe such as death or disability. This next question is a tough one, but it needs to be answered, so here goes: If you or your partner were to die tomorrow, would there be enough money available to raise your sweet innocent to maturity. Would there be enough for food, clothing, a roof over her head? Would he be able to take piano classes, travel, get a university education? Or are you depending on the kindness of family and friends, or worse yet, strangers?
If you’re worried about working insurance premiums into your already tight cash flow, know that the later you leave it, the greater the risk that you won’t be covered and the higher the cost of your insurance.
Familiarize yourself with the tax deductions and credits available to you as new parents. The childcare deduction is usually a big one. Everything from a nanny or daycare, to occasional baby-sitting expenses can be claimed, as long as you get a receipt.
And at no point is a will more important than when we have children. This is the point at which my ex and I stumbled after Baby Girl was born. It took us almost two years to make a will because we couldn’t decide whom to name as her guardian. All our procrastination wouldn’t have done a thing for Alex if we’d both kicked the bucket. And nothing should strike greater dread into your heart than the idea of your children’s futures being left to the court system.