First of all, if you are expecting congratulations! If this is your first, you are in for quite a ride! Hehe. Are you a little worried about what being on maternity leave is going to do to your bank account? If you answered yes, this article is for you! This blog post will provide you with all the financial planning for baby tips you need.

This post is also a personal reflection of how we could have done a lot better to prepare financially for both of my maternity leaves. Peace of mind is a lovely thing.

What I want for you is to come out of your maternity in a healthy financial situation. Being off work with your baby is going to be great (well most of the time) but will be amazing if you don’t have to worry about going into debt while not working.

Below you will find my step-by-step action plan and top financial planning tips for baby. 

Take it from someone who has been there.

If you are not pregnant but plan to be soon, start preparing financially for baby now! Don’t wait until you are pregnant.

If you are pregnant and haven’t started, don’t worry you still have some time to get a financial plan of action for maternity leave! Bottom line is to start now! Like this minute.

If you already have some savings stashed, awesome. You are one step ahead. If you don’t have any or enough savings or you don’t want to dip into that savings, keep reading!

I am going to be honest with you, we did not plan financially for my maternity leaves. This was incredibly stupid. Don’t be like us.

Financial planning for baby is critical because you are young, maybe in your twenties or early thirties and these years are critical for setting yourself up for a healthy retirement fund. Don’t allow yourself to get derailed from your larger financial goals. Below is what I wish we had done.

Here are the steps to financial planning for baby:

1.Know your current financial situation.

Know exactly how much money your family needs to live on each month. To the dollar. Inside and out. Then add in a little more for miscellaneous expenses. Because we all know extra costs pop up.

To do this, track all your expenses and net income. Know what you have coming in and out of your accounts. This is the first step in budgeting for a baby.

Review your bank and credit card statements for the last three months and make a list of all the reoccurring expenses. Also, see how much you are spending on other categories like food and dining out. Add it all up and subtract this from your income.

Do you have a positive number?

2. Check Insurance Coverage & Hospital Costs.

If you have health insurance, ensure you know exactly what is covered. Particularly in the U.S., you need to ensure your doctor’s fees will be covered. Here is a BBC article that estimates the costs of delivering a baby you should read. According to the BBC, the U.S. is the most expensive country to give birth. Your insurance coverage is going to be key.  

Unfortunately, you might be in a position where you will need to save up tens of thousands of dollars if you don’t have adequate coverage and/or to ensure you are protected from surprise costs.

This can have a huge impact on the rest of the plan below. You might need to adjust your situation significantly.

If you are in Canada, you are very lucky. Your bill should be zero unless you upgrade to a private room provided your insurance doesn’t cover it. 

3. Pay off debt.

If you have consumer debt such as credit card debt, student loans, etc. make every effort to pay as much of this off as you can. Get. It. Done!

If you go into your maternity leave with a lot of consumer debt, it is going to be tough. Take the steps below extra serious and put your all into it.

Make a plan to tackle your debt.

Dave Ramsey’s debt snowball method is so simple and so effective. All you do is list your debts and start to pay down the smallest one first and then go the next smallest, and so on. While you are doing this, pay the minimum on the others. It is so effective because most people get a win fairly quickly and it gives them the motivation to keep going.

Credit Cards

Check to see what other interest rates are out there.

With this information, call your credit card company and negotiate a better rate. Use lower interest rates form other credit card companies to leverage the best rate. If that doesn’t work, switch to a card with a lower interest rate. Chances are you can transfer the balance of your debt to a lower interest rate. However, make sure there isn’t a fee for transferring the balance.

4. Estimate irregular expenses.

This is super important!

These are the expenses that can derail your budget in a big ugly way.

Here is what to do.

Think of as many of your irregular expenses as you can like oil changes, gifts, special occasions, etc. They are expenses that don’t happen every month. Maybe they happen once a year or at some other interval which makes them easy to forget about.

Here is how I account for these irregular expenses. In my excel budget workbok, I have a worksheet for irregular expenses that looks kind of like this:

Budget process for irregular or infrequent monthly expenses
How to budget for irregular expenses each month

Each month I revisit this worksheet and update it. The green means I incurred this expense. You can see we have over $10,000 in irregular expenses! Yikes, it adds up fast. However, our kids are in a lot of activities and this year we had to spend a lot on our vehicles to keep them on the road. Not to mention living in Canada is pretty expensive!

Once you have this created, add each month’s total to your corresponding monthly budget. As you can see, your monthly budget from one month to the next is going to fluctuate.

If you don’t use Excel, no worries. Just use a piece of paper and a calculator.

5. Calculate your family income while on maternity leave.

Will you be bringing in any income while off work? (i.e., insurance benefits, employer top-up, side businesses, etc.)

If yes, take out your regular working income and replace it with this amount. (i.e., if you normally make $5,000/month from your job but will only be bringing in a minimum of $800/month, make sure this is the number you have in your budget in addition to your partner’s income.

How much is left at the end of the day?

6. Calculate the amount of money you will need to save while on maternity leave.

How long will you be off work?

The amount you need to plan and save will depend on how long you will be off work.

Maybe you aren’t planning on going back to work after your maternity leave ends or you plan to take extra time. Either way, the amount of time you plan to be off is a factor to keep in mind. If you plan to become a stay at home Mom, this will teach you to adjust to your upcoming financial situation permanently.

How much to save for baby is pretty straightforward. Take the amount you need to live on each month and subtract your family’s income while you are on maternity leave (i.e., your spouse’s income and any amount of money you are bringing in if any) and multiply by the number of months you will be off work.

• Average amount of money required each month for living expenses: $6000*
• Income while off work: $4000
• Monthly shortfall: –$2000

*Make sure you include the irregular expenses in this number. Take the monthly average of this calculation.

If you are going to be off work for 6 months, you will need to save: $2000 X 6 = $12,000.

If you already have this, sweet. If not, or you want to build in some wiggle room, keep reading…

How are you going to save for this amount?

I am assuming you are still working right now.

How many months do you have until you are on maternity leave?

Figure out what you can reasonably afford to save each month until you start your maternity leave.

If you calculate that you will not be able to save up the entire amount you need based on your current budget, start cutting expenses now.

NOTE: If you have a lot of consumer debt to pay off, you are going to need to pay that off as quickly as possible before saving. However, before you pay your debt, make sure to save up at least a $1000 emergency fund. This will ensure you don’t add to your debt if an unexpected expense comes up.

7. Cut your expenses.

Look at each expense and ask yourself where you can cut back.

Here is a list of 21 tips on how to cut everyday expenses and typical budget line items to analyze and see if you can cut back or eliminate:

1. Home and auto insurance. When was the last time you shopped around? If it hasn’t been in the last year or two, get some quotes. Also, consider raising your deductible to reduce your premiums. By switching to a more competitive insurance company and increasing your deductible, you can save hundreds of dollars a year.

2. Negotiate utility bills. Call all your utility providers and see if there is a better rate. If you are in a deregulated area, check out the competition to see if they have better rates.

3. Buy a programmable thermostat. This way you won’t be wasting energy when you aren’t at home.

4. Maybe cancel your gym membership. I say maybe because if you are an avid gym-goer then this should be one of the last things to be cut from your budget. If going to the gym is one of those things you NEED to keep you physically healthy and sane, then DON’T cut it. If you don’t use it or think you could do without, there are a lot of great inexpensive streaming services (ie, Jillian Michaels or Beach Body) and free Youtube channels (ie, GymRa, Fit Sugar, etc). 

I know for me, going to workout classes like spin, cross fit, and pilates has been amazing for me both physically AND mentally.  

5. Limit dining out. If you like to eat out, consider cutting back to next to almost never! This is a huge expense for most people. I know it is nice to eat out but it is so pricey! Save it for special occasions.

6. Keep a food budget. This one is huge. Preparation is 90% of the battle.
Make a list of the meals you and your family like. Try to list as many as you can. Now look at it again and pick out the simplest, cheapest meals that everyone likes. For these meals, stock up on the dry ingredients to make sure you always have them on hand.

  • Meal plan! Take 15 minutes each Sunday and write out your meals for the week. Go grocery shopping and only buy what you need. Put that bag of chips back on the shelf!
  • Make a double batch of dinner. Freeze it or eat it for lunch when you are short on time. I love my instant pot. You can cook meat from frozen in a ridiculously short period of time. One of my top small kitchen appliances! This is well worth the investment in time saving and reducing temptation to go through the drive thru. I do recommend that you go with the 8 qt size as it will give you many more options for cooking such as large batches of soups and stews, roasts, etc. You will be glad you invested.
  • Eat out of your pantry and challenge yourself to make meals with the food you already have.
  • Pack a lunch for you (and your spouse.)
  • When you have leftovers that’s enough for a full dinner, freeze it for a future lunch when you find yourself without a plan (because it will happen!)
  • Make your own coffee.
Prepare for maternity leave and baby financially.
Step-by-step guide to prepare for baby and maternity leave financially.