Welcoming a new child to the family is exciting, but it can also bring financial stress. That’s particularly true if you are planning to take an unpaid maternity or paternity leave. Then, not only do you have the extra expenses that come with a new person in the household, but you’ll have to contend with a reduction in your income as well.
“Just a little planning goes a long way,” says Caitlynn Eldridge, founder and CEO of Eldridge CPA. It’s best to plan prior to becoming pregnant, Eldridge tells her clients, but parents have options even if they didn’t prepare in advance.
Here are seven ways to get ready for an unpaid maternity leave:
1. Understand your rights under the law.
2. Plan when to use your personal time off.
3. Buy disability insurance.
4. Be strategic about baby registries and requests.
5. Boost your savings.
6. Talk to your boss about work options.
7. Tap into community resources.
Understand Your Rights Under the Law
The first step in preparing for parental leave is to understand what the law requires. There are two types of law that could apply: federal law and state law.
“You go to the federal law first,” says Tasmin Kaplan, a partner with the Davis Malm law firm in Boston. “That’s your baseline.”
Under the federal Family Medical Leave Act, qualified employees are eligible for 12 weeks of unpaid leave after the birth of a child or the placement of a child for adoption or foster care in the employee’s home. This leave must be used within one year of the child’s birth or placement.
Qualified employees are those who meet the following criteria:
- Work for a covered employer, which includes public agencies and private employers who employ at least 50 workers for 20 weeks of the year or more.
- Work for the employer at least 12 months.
- Work at least 1,250 hours during the 12 months preceding the leave.
- Work at a location in which the employer has 50 or more employees located within 75 miles.
Depending on your state, you may be entitled to additional leave or even paid leave. For instance, in Massachusetts, the Paid Family and Medical Leave program allows many workers who have earned at least $6,000 during the past four calendar quarters to take up to 12 weeks of paid leave after the birth, adoption or placement of a child.
Plan When to Use Your Personal Time Off
Once you know what leave you’re entitled to under the law, it’s time to consider your employer’s policies and any personal time off you’ve accrued.
“You, of course, want to use whatever is available,” Kaplan says.
At the same time, be strategic about how you use vacation days or PTO. Leave through the Family Medical Leave Act can be used anytime within 12 months of the birth or adoption of a child. So you may prefer to use vacation time first and save unpaid time until later in the year.
For instance, if you receive an annual bonus, that may be a good time to use your unpaid FMLA leave so you still have some income while off work. However, confirm that you will still receive a bonus while on leave first.
Also, coordinate your leave and paid time off with that of your partner. Some couples prefer to take leave together while others may want to stagger their time off to minimize the need for child care.
Buy Disability Insurance
Your workplace may not offer paid maternity leave, but your compensation package may include other benefits that could be helpful. For instance, see if you have a short-term disability benefit. Not all disability insurance policies pay for maternity leave, but those that do may reimburse some or all of your lost income.
Another option is to buy your own disability insurance policy, but you’ll need to do that in advance. “Most of these you can’t put in place once you are pregnant,” Eldridge says. Instead, major insurers often require policies to be in effect for at least 10 months before they will pay out benefits for a maternity leave.
Be Strategic About Baby Registries and Requests
Family, friends and co-workers are often eager to help new parents. If you find yourself surrounded by supportive people, be strategic about how you respond to requests for what you want or need.
Asking for meals instead of flowers is one option to consider, suggests Barbara Palmer, founder of Broad Perspective Consulting. Another may be to suggest gift cards to a supermarket rather than gifts.
If you do receive items you don’t need or can do without, consider returning them to buy less expensive alternatives and use any leftover cash to help make ends meet during an unpaid leave.
Boost Your Savings
“It’s taking a step back and seeing where the money is going,” according to Palmer. “It’s that tradeoff of what do we need vs. what do we want.”
Everything from cable to coffee should be on the table when it comes to making cuts, and couples should have open and honest discussions about what’s important to them. Get creative too, Palmer suggests. For example, if you have supportive parents or family members who would love to help with a baby, consider moving in with them for a few months and renting out your home for extra income.
If your budget is already lean, consider diverting your retirement contributions to regular savings where that money can be used while you’re on leave. While not ideal, it is better than charging expenses on a credit card if you run out of cash before going back to work.
Talk to Your Boss About Work Options
Most new parents want to focus on their child exclusively, but an extended unpaid leave might not be financially feasible for some families. In that case, discuss with your employer in advance whether there are ways to still earn income while on leave.
“It could be that you work with your employer to take on some part-time work,” Palmer says.
If remote work is an option, that may be a way to pick up some hours without disrupting your new home routine. Freelance or consultant jobs could also be ways to close the gaps financially. However, be realistic about the amount of time and energy you will have to devote to these projects.
Eldridge recommends her self-employed clients look for ways to reconfigure their income streams while on leave. For instance, adjusting client payment plans may be a way to keep a steady flow of money without much extra work on the part of a new parent.
Tap Into Community Resources
Despite your best efforts, you might find coffers running dry during an unpaid leave. In that case, don’t be afraid – or ashamed – to take advantage of whatever community and government resources are available to you.
Government programs such as WIC, SNAP and some state disability programs may be able to help women with food and other costs during an unpaid maternity leave. Community nonprofits may operate food banks, offer newborn layettes or provide other support to new mothers. Hospitals and retailers may also have freebies, including formula and diapers, for new families.
Nothing can completely alleviate all the unknown factors associated with a new baby, but these seven tips may bring some level of certainty to the uncertain world of unpaid maternity leaves.