A few years ago, with the birth of our first child, my husband and I were faced with a situation we’d not been in before – how do we look after this tiny new human, and how do we manage our finances on a single income?  A few years on, our tiny human is not so tiny anymore and our finances are back on track albeit with a small deviation along the way.

Here’s my hints and tips for ensuring a financially stress free maternity leave.

Prepare and plan early
That bun is cooking in the oven for 9 months, use this time to prepare not only the baby’s room but your budget! If you have not already, this is a great time to put in place a family budget to track your spending and monthly expenses. I have a great budget tool available, contact me if you’d like a copy.

Know your entitlements
Take advantage of any government financial assistance that you may be eligible for. Check out www.humanservices.gov.au/customer/subjects/having-a-baby

Have a chat with your employer about your leave entitlements – if your company does not offer paid maternity/paternity leave, think about using other paid leave that you have accrued eg holiday, long service.

Review existing debts
Have you been using the same services for years without review? Chances are you can get a better deal and save some money on most of the following simply by reviewing your current contracts and either negotiating a better deal or switching to a different provider:

• Your gas and electricity bills (I recently negotiated with my current provider and increased my pay-on-time discount from 5% to 30%)
• Your telephone bills (do you really need all that data? And those unlimited calls and texts?)
• Your home loan (this in particular should be reviewed while both family members are still working – contact us to discuss)
• Your private health insurance (do you really need those extras that you’re paying for? Or could you reduce to hospital only cover? Could you get by with basic extras while on maternity leave?)
• Home and contents insurance

Save, save, save!
The months prior to your little one’s arrival can be expensive with big purchases (think prams, nursery, baby essentials etc). However, try to put aside as much money as you can into your savings or offset account which can then be used to help fund repayments while your income is reduced.  Consider how long you will be a single income family, and calculate your mortgage repayments over this term (eg 12 months at $1,500 per month loan repayments = $18,000).  If possible, aim for this amount at a minimum to be sitting in your offset. Don’t worry if you don’t quite reach this goal, you may not need to use all these funds during the period however it will be comforting knowing the money is there if required.

Most importantly, don’t worry about ‘going backwards’ by using any savings or redraw – it’s more important that you and your family enjoy this precious time at home with your little one with as little stress as possible. Babies are only babies once, and you have the rest of your life to work and pay off your mortgage!

Change your repayments to interest only
If you are making principal and interest repayments on your home loan, it may be possible to change your repayments to ‘interest only’. This will reduce your repayments to the minimum amount each month however be aware that you will only pay back the interest on the loan, and not actually pay anything off your loan balance. This is at the lenders discretion, contact us if you are interested in this option as we may arrange it for you.

Consider a fixed rate loan
A fixed rate loan can provide the security of knowing exactly what your repayments are going to be over a certain period. This can ease the stress of increasing loan repayments if interest rates go up while your family is on a single income.

However, careful consideration needs to be taken with fixed rate loans as you will lose a degree of flexibility with your loan which means they are not always the best option. Contact us if you are interested in this so we can determine if this is suitable for you.

Take a repayment holiday
Most lenders offer the ability to temporarily suspend your mortgage repayments for a short period (generally two to six months) if you’re under financial stress. This is called a ‘repayment holiday’. However, this is by no means an easy way out and one that we don’t recommend unless absolutely necessary.

How does it work? The interest you would normally repay gets added to your loan balance and when the repayment holiday ends, your repayments will be recalculated based on the new higher loan balance. This means your repayments will be slightly higher, and with a higher principal loan balance you will pay more in interest.  It may then take you longer to pay off your mortgage and can cost you more in the long run – hence why we don’t recommend this unless required.