Alison's Money Rule

Living on a baby budget

Posted November 28, 2011
Originally Published July 28, 2009

If a new family is in your future, prepare for it financially before the wee one is even a sparkle in Dad’s eye by living on a baby budget.

I am seeing babies and big bellies everywhere. On Saturday at my local farmer’s market I constantly negotiate one or the other between basil, beets and blueberries. And since such markets tend to be intimate affairs I can’t help overhearing the conversations of parents-to-be chatting with new Moms and Dads.

A frequent comment goes something like this. “We’re excited but a little concerned about managing on my mat leave pay.” As I cast my eye to the nearly full term tummy I’m thinking, uh oh, a little late to start worrying.

The best way to prepare for mat leave pay is to try it out long before the joyous day arrives. If you get in the habit of spending less to accommodate a lower income you won’t find it a hardship later on.

Start with the budget template on my site, alisongriffiths.ca. For income use Mom’s mat pay (assuming it is Mom who will be on leave) together with the partner’s take home. Don’t forget to increase existing take home to factor in the additional tax deduction of a new dependent.

As you fill out expenses you will quickly see where you need to cut back in order to keep the bottom line a healthy black.

Of course, with two full-time incomes currently you should now have a surplus! Stash it in a baby account to be used for emergencies during maternity leave. On the other hand, if you are debt laden devote the surplus to paying it down. With a number of months of boosted payments you can make a big dent in what you owe. Lower debt means lower stress for new parents.

The discipline of living on a baby budget in advance also offers you some post mat leave flexibility. If one parent decides to stay at home or work part-time you have a greater chance of making it happen if the habit of spending less is well-ingrained.

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