Dropping from two full time wages down to one, either for a short period of maternity leave or on a longer term basis is often a very financially challenging time. These tips can help you be better prepared for budgeting on one income so that this period is less stressful.

Most families will have periods of time where they need to drop to one wage. It isn’t always possible to predict when these periods will be or how long they will last but in the case of budgeting on one income following the birth of a baby it is slightly easier to plan. In almost all cases you will have around 9 months notice so using this time to prepare is essential!

Budgeting On One Income Tips: Before Maternity Leave

Prepare a budget

If you don’t already have a budget, now is the time to sit down and develop one! You need to know what your current expenses are, where your money is going, what you could cut back on and how much you can save. If you do this as early as possible you can start setting aside any extra savings into a maternity leave fund and make longer term financial decisions.

Set aside savings to supplement your income

For many people, budgeting on one income alone will simply not be possible without significant lifestyle changes (like selling their home!). In these cases, work out the extra you will need to supplement a single income and work out a plan for how you will save that in time for the drop in wages. You may be planning to supplements with paid leave, Centrelink payments or savings. Whatever you are doing, make sure you have a plan and know how much you will need.

Discuss plans for future work arrangements

Are you planning to stop work indefinitely? Will you be sharing maternity leave with a partner? If you are planning to return to work, when and how many days. Remember things can change. You may think you will be ready to go back at 12 weeks but if your baby isn’t a great sleeper you may quickly change your mind. Perhaps you’ve planned to work until 37 weeks but your baby decides to turn up at 32 weeks? As much as possible, allow a few months leeway in your plans so that you have some room to move if you need it.

This is also a good time to discuss lifestyle changes. Budgeting on one wage will likely require changes in the way you live. Depending on your income and expenses and what your plans as a family are for future paid work you will need to make decisions on any necessary lifestyle changes. What is most important to your family? Is staying in the area you currently live a priority? Is having one parent at home full time more important? Is having the money to send your kids to a private school something that is important to you? These things all need to be considered as each decision will affect other areas of your life and income. To stay home full time you may need to move home. To stay close to family and friends you may need to return to work part time. If you are wanting to send your kids to private schools, perhaps you will need to take a shorted period of maternity leave. Every family is different but working out what is important for YOUR family is essential.

Start living on one wage as much as possible

You may not be able to completely live on one wage but try to reduce your budget to live on one wage as much as you can. Take into consideration any Centrelink payments you may be entitled to or any paid maternity leave you have access to. You can use this online calculator to get an estimate of family tax benefits you may be eligible for through Centrelink.

Try to cut your expenses

Go through all your expenses, insurances and utilities and cut back on what you can. Get cheaper deals, shop around and see what expenses you can reduce. Budgeting on one income may mean you need to cut back on luxuries. You’re baby is unlikely to notice that you have the top Foxtel subscription or the newest mobile phone.

Pay in advance

Try and prepay expenses for the first year following your baby where you can. Pay you electricity in advance, pay the car insurance yearly, overpay your rates and water. The less bills that come up while you are on a smaller income the easier it will be. Try not to take on any extra financial commitments like phone contracts that will eat into the budget during this time.

Don’t go baby shopping crazy

You’ll be surprised at how cheaply you can prepare for a baby (or how expensive it can be if you make it!) Write a list of the essential items you need and a few luxury items you’d love. When people ask what you need or would like, have ideas ready. If family want to buy gifts, ask if they’d be happy to contribute towards things you really need.

Shop on gumtree, eBay and your local online buy, sell swap pages. You can get some wonderful quality items for a fraction of the cost of new things. Most baby things are used for a very short period of time and second hand items are usually in excellent condition.

Try not to start off in debt

With the exception of a mortgage, try and get rid of all other debt before baby comes. Pay off personal loans and credit cards or enquire about combining them into one loan at the lowest rate possible. Paying off debt on two incomes with no children is a lot easier that trying to do it while budgeting on one income with a baby.

If the option is available you may want to discuss a hold on your mortgage for a period of time while you are on leave. Obviously financially this isn’t ideal as you are just delaying the inevitable and building up interest in the mean time but if it avoids you building up further debt while on one income then it may be a good option for you.

Budgeting On One Income Tips: When Baby Arrives

Stick to your budget

Don’t be tempted to dip into savings for little purchases here and there. If you want your savings to last for the period you’ve planned, you need to stick to your budget!\

Learn to choose cheaper activities

It can be easy to get into the habit of meeting for coffee or popping out to lunch with your new mothers group. While this can be a lovely treat, it is a very expensive long term habit. Try and establish cheaper meet up ideas (like these cheap get together ideas with kids).

Keep communicating

How is the reduced income working? Are both of you feeling ok about the changes? This can be a time when some people feel resentful or trapped so make sure you keep communicating. Budgeting on one income can be hard but it is essential you are a team!

Do you live on one income? How do you do it?