Baby on a Budget – Part 2
Posted by Christi | Filed under Christi
Again, I need to make this clear – NO, I AM NOT PREGNANT. One month ago I began my Baby on a Budget series of blog posts where I work towards being a Money Savvy Momma. I went to work and created a maternity leave budget to explore what life would be like with a little one. I left off with an unbalanced budget, and have been humming and hawing ever since.
My husband and I do not want to find ourselves in debt after a year of mat leave. We work hard to keep our credit cards clear. We know we can make it work, but the question is how?
In our situation, we must increase our income during mat leave. We have explored a few possibilities:
1. Save up ahead of time
The idea itself is great! We begin saving now, to create a reserve fund for later, from which we will pull a monthly payment to top up our income during mat leave. Right now we are beginning home improvements. We put money away for them every month, and have built up a nice savings account (that will likely disappear very quickly once the major renos begin). We are also putting money away for other annual expenses like gifts, and saving for emergencies. In all honesty, I don’t want to pull money away from these areas right now to begin saving for mat leave. (Hey, I don’t have kids yet, I’m still allowed to be selfish with my money). So we’ve pushed this idea aside for now.
2. Alex stays home with baby
After the initial 15 weeks of maternity leave, either my husband Alex or I can take parental leave for 35 more weeks. If I stayed home for those 35 weeks, I would continue to receive EI benefits. However Alex would receive 95% of his salary if he were to take parental leave. This means that we wouldn’t have a budget shortfall. Is it an option? Yes. Would it work? Yes. Is this the route we’re going to go? … We don’t know. There are so many unknown variables like breastfeeding, and mommy being away from baby, that we feel it’s best to “wait and see.” We’re lucky to have this option available to us.
3. Alex works overtime
Since my last Baby on a Budget blog post, Alex has been approached by his employer to begin working overtime. Alex is on a special project that will continue for years to come, and overtime is being offered in abundance. The best part is, Alex doesn’t mind and he gets to do his overtime from home.
As a solution to our baby budget shortfall, Alex could work overtime once baby arrives. However, we have a feeling that he might be a tad bit exhausted, or I will be, and won’t want him working overtime. So overtime with a little one may not be the best solution.
Our Solution for Now
What we can do is save up his overtime in advance. We calculated our anticipated budget shortfall, multiplied that by 12 months, and that will be our Baby Budget savings goal. (We will still have our emergency savings as we know we can’t plan for everything). Coincidentally, with Alex working the minimum overtime hours, it will take 9 months to reach our savings goal. So maybe we have a little fun with the overtime money now, and then once I actually am pregnant, we start saving that money to draw from during mat leave.
We decided on this together; a little of idea one, and a little of idea three. It’s been interesting to have these conversations with my husband even before we have kids. I feel good about it. The nicest part is that our Baby Budget is finally balanced on paper.
Mommies and Daddies, did you pre-plan your mat leave? I’d like to hear about your experience, or perhaps learn about some of the unexpected things that can come up financially in the first year of baby’s life. Please fill me in!
Thanks for following along. Have a fun and safe Canada Day long weekend!
- Christi (@ChristiPosner)
Christi Posner is a Credit Counsellor for the Credit Counselling Society, a non-profit, charitable organization. Born and raised in Winnipeg, Christi is a newlywed, a new homeowner, and with the exception of car loans and a mortgage, she is newly debt-free. Her goal is not merely to survive, but to financially thrive; and to do so with some passion, empathy, humour, and a smile.
June 30, 2012 at 2:57 am
One thing we found was the the mat leave is always LESS costly than we anticipated. It’s expensive, but you save on some items, which helps. Our expenses drop quite dramatically when Tamara is on mat leave.
July 1, 2012 at 3:25 pm
If you don’t mind my asking, what sort of costs are reduced? As someone who doesn’t spend a lot regularly, I find it hard to fathom the savings. Rent and food costs wouldn’t go down, my transit pass wouldn’t go down, and I would continue to replace clothes as I need to.
Perhaps socializing out of the apartment would go down, but I don’t actually understand how expenses could drop dramatically, unless I were actually driving.
June 30, 2012 at 8:58 am
Sure it’s easy Pre plan your budget and have a savings account and we did another good tip is once you get pregnant buy a box of diapers every month till baby is born helps cut down the cost while on mat leave, you always want to factor our expenses do go down because you suddenly will enjoy just being home as a family, you also will probably eat out less and do a meal plan more often . All of this is easy said and done until your 6 months pregnant and find out your having twins -wow can that throw your plan out the door…..loving the blogs
June 30, 2012 at 9:20 am
My last baby was a surprise (hey, it happens!). After already having 3 kids, the youngest being 7, I had NO baby stuff anymore. So, when I found out I immediately started putting money into a TFSA (tax return, extra pay, etc.) and saved as much as I could in the 9 months. This was for baby stuff as well as to supplement my mat leave, because even though I got the max amount for benefits, it was still well below 55% of my income and my employer did not top up
. And knowing what my fixed expenses would be every month, I knew that EI and Child Tax Credit would not cover it.
But I also found that people can be generous. I had friends who were still had baby stuff and gave or lent me the “bigger” stuff. I was lent a cradle, and friends gave me their swing, crib, stroller, playpen, some clothes, etc. I also get most of my baby (18 months now) clothes at Once Upon a Child So that is one thing to consider when planning (or not..lol) for a baby. Less expensive models, or gently used gear can be great for the budget. And let’s face it…a newborn doesn’t care where their diaper bag came from!! LOL.
June 30, 2012 at 1:04 pm
We timed our pregnancy so that we would just be finished our debt payments when baby is born. We were down to our last student loan and had started paying a whopping $2000 a month on it…so when that is paid off (next month!!), we’ll have a huge surplus which will be used for baby budget (and emergency fund). My employer tops up to 80% for 6 months so that really helps…other job opportunities have come up in the past few months, but I don’t have the luxury of considering them because I can’t justify leaving this employer and giving up these benefits.
June 30, 2012 at 1:11 pm
Thanks for the info. I don’t have babies on the way for another 3 years or at least that is my plan says. My fiancé and I, as well as me nd my best friend, have discussed this topic to figure out numbers on many different situations. I think we will have the savings account so we have a nest egg to draw from to help with the shortfall, but who knows what I’ll happen in 3 years
June 30, 2012 at 1:14 pm
I like the majority of your ideas Christi for saving up before, planning on who goes back to work etc.. I think that you are definitely on the right path to being “budget ready” for when a baby comes. The one thing you should ALSO think of is, your taxes for the following year AFTER baby arrives, whomever is on maternity leave – and yes even alex getting topped up – you are not going to be paying a lot of taxes for those 12 months. So when it comes to tax time and you put in your EI amount made/claimed -there is always a surprise for many moms who OWE a lot back to the government. I am lucky and was told by my sisters about this, so that is one thing we saved up for as well, tax season!! We are lucky that with Tanner’s job, he get’s to claim so much (meals, US trips, etc.) so he always gets $$ back. So now that we know that there is kind of a kickback to getting topped up while on maternity lave (my work DOES do that, but apparently no one wanted to tell me this when i did go on Mat Leave) next time we are NOT getting topped up and going to be saving even more.
And i agree with commenter Mike as well – you think things will be more expensive or your on a tighter budget so it will be harder, but when you factor in those other things like lunches everyday, (packed or bought), gas to and from work, more driving etc.. your everyday life gets to slow down to a certain degree and we found that we were STILL able to save $$ while I was on MAt Leave.. and buy a new house! lol.. Great Blog, hope you liek my input! xox
July 2, 2012 at 9:44 am
Planning for any budget shortfall during mat leave is, of course, an excellent plan. In my experience through, it was returning to work that was the most expensive. We saved a bit in advance to subsidize the budget, bought only the essential baby gear, and lived pretty frugally during my two mat leaves. Going back to work meant that my salary went back up to normal, but we now also had my commuting costs, plus $1000/mth in daycare costs, and the diaper costs continued. If your take home salary is going to go up by a similar amount to daycare costs, you aren’t going to come out ahead when you go back. Rather than getting a tax refund for your daycare expenses, have your payroll group adjust your deductions to reduce the tax you pay all year. You won’t get the big refund, but it will get you a little more on each paycheque which can really help if things are tight week to week. Just remember to have them adjust back to the regular deductions when daycare stops.
FYI- with our first I had no idea how the baby bonus worked so when the cheques started arriving I was thrilled. A year later they informed me that they’d forgotten to include my husband’s salary in the calculation and we actually made too much to qualify. I had to repay hundreds of dollars just as I was about to start paying for daycare and return to work. Not a happy situation. Double check that you really qualify for anything you receive.
Also, don’t leave the baby with anyone for even a few days to take a short holiday while on mat leave. If you leave the country and can’t prove the child was with you, then you were theoretically available for work and will have to repay your EI premium for that week. I don’t know the rules on travel outside your province but within Canada. I figure as soon as you fly anywhere and your passport is scanned into the system, they are looking at your file. As long as you don’t fly you’re probably ok, but look into it before you take anyone up on their offer to mind the baby so you can fly off for a couple of days to regain your sanity and get some sleep.
July 2, 2012 at 9:13 pm
Neither of my children were pre-planned. We were very fortunate – we know so many couples who struggled to have children and when we decided to try, I had one cycle and boom! There was my first child! We decided to have a second one and I discovered I was already pregnant! So pre-plan…nope! But I wouldn’t have it any other way!
I disagree with people saying it didn’t cost as much. In our household, I am the major breadwinner and was earning well under half my salary on mat leave so yes, we accumulated debt.
Some tips: find free (ex. Library) places or cheaper things (ex. Mommy and me movies at cinemas) to get you out and about. Really question whether you need certain items and don’t buy into high prices and brand names for things (ex. strollers). Second hand clothes (someone mentioned Once Upon a Child) OR take hand-me-downs – they outgrow things so fast as babies! Ask friends or families for items (they are happy to pass on things).
One important thing to consider: if you are putting the baby in daycare when you go back to work after mat leave – reserve a spot while you are pregnant! Here in Ontario, it is difficult to find infant daycare and costs over $1000 a month.
Also – be sure to budget for some nights where you and hubby can get out for a night on your own! It’s worth it’s weight in gold!
July 3, 2012 at 9:37 pm
We planned Sarah’s conception so that she would be born in 2001 right when mat leave switched from six months to a year. Sarah had other plans and came early on Christmas eve 2000. I lost out on six months mat leave which was a huge setback for us as I had not planned to go back to work. I have a masters degree and left a good paying job in Toronto to be a sahm. But we needed that six months to get us by long enough for my husbands business to get off the ground so I took a local job as a cashier at Walmart so that I wouldn’t lose three hours a day commuting and my husband who was still working from home could swing by with the baby during my lunch breaks when I had a long shift for me to nurse. It wasn’t glamorous but I’d do it again. I wasn’t too proud to take the job and I actually enjoyed it for the six months I was there.
July 10, 2012 at 12:10 am
I found that being home with the baby cost us more money. Sure all the work related expenses are gone, but there are additional expenses for being at home.
The biggest difference we found was in our utilities and water. We’re also in Winnipeg. We use a programmable thermostat to control the temperature in the house, so the heat/a/c is only on when we are at home. Now that I’m home all the time, plus with the new baby who need a comfortable ~20degrees C, unfortunately the hydro bills has been much higher. Plus all that extra clothes/hand washing uses up a lot of electricity and water. We’re still using our car to go to baby programs, the programs are free, but the gas is not.
Sometime the “last minute shopping” costs has also hit us. Baby need gripe water/tylenol/rash cream/gravol/benadryl/emergency room visit, what ever at the last minute, with nothing else open but Shoppers, well those cost a lot too. There is also the “too tired to care” takeouts, buy everything on the shelf just in case when the baby is sick, can I just buy something to make the baby stop screaming?.
We saved up the money before I went on each maternity leave. However we had a surprise baby born 12 months after the last one, so now we are on one income as I don’t qualify for EI again. However, earlier on in our marriage, our biggest and best decision was to base our house budget on one income. Now that we are truly only on one income, we can still do it, not comfortably, but not going into debt. I’m not sure if I’m going back to work, as daycare for 3 small children is just not worth it.
In terms of saving, we saved for the maternity leave, plus $1000 baby fund, to use for those unexpected baby costs. Plus and additional $1000 pregnancy fund to use during the pregnancy (parking for doctor visits, cravings, medication if needed, pregnancy pillows, maternity wear, maternity support, massages, etc.) We didn’t end up using all the pregnancy/baby fund, so what ever leftover will go to their education fund.
As a suggestion with the Alex’s OT money, I would save enough now to meet your “maternity saving goal”, then feel free to blow the money after you already have the saving. You never know, situation can change. Something could happen to you/Alex, job situation changes, budget changes, etc. (sorry to be a downer) If you already have the saving in place, then you won’t have that added pressure through the pregnancy.
On baby registry – ask for diapers, all different sizes, not too many on size N,1-2, more size 3&4. All the big stuff/toys you can buy second hand for much cheaper through Kijiji. Clothes buy used.