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Taking time off for family or medical reasons, commonly referred to as Medical Leave, can be one of the most critical periods in your life, whether it’s welcoming a new baby, caring for a loved one, or attending to your own health. But what about your finances during this period? Without proper planning, this time off could lead to financial strain.
The key is marking the right preparations so you can manage your finances smoothly and focus on what truly matters. In this article, we’ll walk you through 15 proactive steps to secure your finances before you step away from work.
1. Plan How Much Money You Will Need
Preparing for unexpected costs and events is essential no matter how carefully you plan. If you’re planning a family and it’s your first baby, talk to other parents about the unplanned costs involved. Always plan to have a little more than you initially expect, just in case.
2. Establish Employer and State Benefits
Whether you’re planning to have a baby or unplanned medical leave, it’s essential to determine ahead of time what benefits you are entitled to. The first few months of caring for a baby are hectic, and you may have less energy to research and maximize benefits. The first step is to talk to your HR department. If you suddenly become ill, it may not be possible to backdate benefits, so take the time to find out your financial entitlements.
3. Get Health and Disability Insurance
Health insurance is vital because you never know when illness can strike. Talk to friends, coworkers, and family members to get a recommendation for a health insurance company that provides a good service at a reasonable price if your employer doesn’t offer it.
Ensure your insurance company provides accident and disability cover, and check the small print for restrictions.
4. Make a Baby Budget
Before the baby arrives, create a budget by checking prices for diapers, food, clothing, bedding, carry cots, strollers, baby-proofing the home, and more. Add in the costs of decorating the nursery, babysitting, and childcare.
Visit baby stores to assess prices and talk to family, friends, and coworkers about how much they spend on their babies.
5. Update Your Life Insurance
No matter how old you are, life insurance protects your family and provides a cushion for losing your income if you die. When you have a baby, update your life insurance to enable your partner or family to care for the child without worrying about finances.
Ensure you update beneficiaries if situations change.
6. Organize Your Will
When someone dies without a will, it can create a horrible can of worms, causing arguments and disharmony between relatives. Everyone has an opinion on what the deceased person would have wanted to happen, but a will prevents disputes.
If there is no will, the law decides who inherits the estate, including money, property, and personal belongings. Take care of the people you love and organize your will, including details of childcare if appropriate.
7. Get Income Protection Insurance
When you’re thinking about starting a family or considering the costs of medical leave, it can seem like you need multiple layers of insurance to protect your income. Income protection doesn’t cover maternity, but it can safeguard your income in the case of an accident or illness.
Most insurance policies provide a percentage of your current income, so ensure that the amount is feasible to cover monthly expenses.
8. Open an Education Savings Account
It is never too early to start saving for your child’s education. Start a college savings account and invite family and friends to contribute when they want to send a gift to your child. The accumulated funds will compound over time and help ease the costs when your child leaves for college.
9. Review Joint Finances
If you’re losing one income in the family, even if it’s temporary, it’s essential to discuss decisions regarding household budgeting. Set aside time to talk honestly about money planning. Include credit card debts and spending budgets to accommodate the reduced income, such as how much to spend on weekly groceries.
Talking about money can be challenging for couples, but it can help them transition to reduced income.
10. Plan for One-off Expenses
After planning a monthly budget, consider how to pay for one-off expenses such as a new chair, cot, and baby car seat. Depending on the brand, these items can be expensive, and you’re unlikely to want to buy these essentials secondhand.
If family and friends’ children are out of the baby stage, it may be possible to borrow their baby equipment, but if not, prepare so you can budget.
11. Reduce Your Debts
If you suddenly lose your income, the pressure to pay your credit cards and loans is the last thing you want. Defaulting on payments could also affect your credit score. Minimize your credit card spending and pay more than the minimum to clear the debts before the baby arrives or you take medical leave.
12. Create an Emergency Fund
Reduce the stress of losing an income by creating an emergency fund. Ideally, save enough money to cover monthly expenses and unexpected costs for at least six months. Having that money aside gives you breathing space to make rational decisions about your future.
Automate a set monthly amount into a savings account and decide you cannot touch that money unless it is an emergency.
13. The Cost of Caring
Challenges arise if one person becomes seriously ill and needs constant care. The spouse becomes the carer or hires someone, which can be costly. Have these serious discussions about how you would manage financially in the case of severe illness and someone having to take time off work.
14. Cut out Unnecessary Expenses
Create a budget outlining monthly expenses such as mortgage or rent, food, insurance, phone, utilities, and transportation costs. Then, decide what non-essential expenses you can cut, such as the daily coffee shop visit, cable TV, gym membership (that you’re not using), magazines you don’t read, and so on.
Pay essential bills by direct debit or standing order, as most suppliers offer a discount for guaranteed payments on time.
15. Consider Part-Time Work or Side Hustles
Once you’re home and the baby settles, it could be an excellent time to explore the multiple opportunities for working remotely with a part-time job or side hustle. You could start a YouTube channel, learn digital marketing, or use whatever skills you have to offer freelance services that fit in with your family.
Start thinking about what might interest you that could make extra income. Even if you’re on medical leave, if you feel well enough, your company may consider part-time remote working until you are well enough to return to full-time.
The Purpose of a Budget and 11 Reasons Why You Need One
The primary purpose of a budget is to track your income and expenses. A budget also ensures your bills are paid on time, helps you plan for the future, helps identify any bad spending habits or areas where you could reduce your spending, and ensures that your spending reflects your priorities. By creating a budget and sticking to it, you can ensure your needs are met, your bills are paid on time, you get out of debt, and you meet your financial goals.
17 Items to Cut From Your Budget You Won’t Miss
Are you feeling the pinch in your wallet? You’re not alone – many of us are looking for ways to save money without drastically changing our lifestyles. But what if we told you there are things you’re spending money on right now you wouldn’t even miss if they were gone? Yes, you read it right! This blog post is all about those sneaky budget items that are quietly draining your bank account. We’ve rounded up 17 items you can cut from your budget today. So, let’s dive right in and save more of your hard-earned money!
