Doing Money Series: Preparing for Maternity Leave

Photo by Bastien Jaillot on Unsplash.

Hi Billfolders! I’m Michelle, and I volunteered to write a Doing Money series in which you get to follow me for a to-be-determined amount of time and see how a married, thirty-something tax accountant mom does money. I’ve changed our names and have been purposefully vague in some areas to protect our identities. Despite that, I’d like to be as interactive and transparent as possible with all of you — so if you have questions or would like to know anything more specific about how we “do money” for a category, let me know down in  the comments and I’ll address it in future posts.

In my previous posts I covered who we are, what we do, my budget, and why budgeting separately works for us. For this post, I want to dive into how we’ll be “doing money” when I’m out on maternity leave (which should be happening now as you’re reading this or this late baby will have some explaining to do). Also, I’ll be sharing how my actual spending lined up with my budget for September.

I’m sure we could have a rousing discourse about parental leave in the United States — how long parents should get for leave, if it should be paid/unpaid and who should pay for it, the disparity that exists in each individual case, and so on. I definitely don’t want to go into it here, because even as a second-time mother there are nuances in the system that I truly don’t understand. Instead, I’m just going to outline how my leave will work and what financial impact that will have on my side of the budget.

The first component of maternity leave that I am entitled to is short-term disability. I had to open a claim at least 30 days prior to my planned leave date (aka my due date). If my doctor certifies the need for it, I can take up to four weeks of short-term disability leave prior to my due date. The first week of short-term disability is a “waiting period” where you need to use your PTO in order to get paid. If you do not have sufficient PTO to cover this waiting period, you are initially unpaid, but will recoup this money after being out on short-term disability for 21 days. If you deliver “naturally”, you receive six weeks of short-term disability beginning with the date of birth. If you deliver via c-section, you receive eight weeks of short-term disability beginning with the date of birth. If you do not use the four weeks before the date of birth, you cannot tack them onto the end. After giving birth, my doctor will need to complete the paperwork provided by the short-term disability administrator and send it back in a timely manner or I won’t get paid. Short-term disability is paid out at 2/3rds of your normal pay, on the same pay schedule, with all your normal payroll deductions (insurance, taxes, retirement, etc.).

The second component of maternity leave that I am entitled to is paid parental leave. This is a benefit offered and paid for by my employer. I have to file a form with my employer at least 30 days before my anticipated leave to qualify. If I do that, I receive up to six weeks of paid parental leave which can be taken all at once, or in two week increments at any point during the first year of my child’s life. This is taken after you have exhausted your short-term disability leave and is paid out at 100 percent of your normal pay, on the same pay schedule, with all the normal payroll deductions.

The final component of maternity leave that I can take advantage of is state family leave insurance. This is a benefit provided by the state I work in. Every pay period, a nominal amount is withheld from my paycheck and paid into the state family leave insurance fund. If I exhaust my short-term disability and paid parental leave in full, I am eligible for up to four additional weeks of paid leave through the state during the first year of my child’s life, which is paid out at a capped rate of around $600 per week. To qualify, I need to complete a state family leave application, then submit it to my employer so they can complete a certification section and submit it to the state. The pay is distributed via a debit card system, not on any discernible schedule (in fact, some people tell stories of not receiving this FLI payment until they’ve been back at work a few months), and without any normal payroll deductions. When you return to work, payroll double-deducts your normal payroll deductions (insurance, 401(k), etc.) until you are caught up.

For any additional time I would like to take after this block, I would either need to use PTO (if there is any remaining), or be unpaid.

I also have (unpaid) job protection for 12 weeks through the Federal Family & Medical Leave Act (FMLA) and then an additional 12 weeks through the state’s Family Leave Act (FLA). This guarantees that my job will be waiting for me when I return, provided I return within 24 weeks. If normal corporate restructuring happens and my job is eliminated, I need to be re-hired in a substantially similar position with substantially similar benefits and pay (at least, I think that’s the law — again, still not familiar with every nuance).

Still with me? Good — because I could barely keep up with this, and this is my second time doing it.

To illustrate, here is how all of that is going to (hopefully) work out, assuming baby comes on time:

September: Full pay (income will remain at $4,600 this month)

I am forgoing short-term disability leave in advance of my due date. I want to maximize my pay for as long as possible to give us as much of a cushion as I can to get by on reduced pay for the duration of my leave. It helps that my employer has a flexible work from home policy, and my department head will allow me to work from home full-time starting two weeks before my due date.

October: 2/3rds pay (I’m estimating income will shift down to ~$3,100 this month)

Baby is due on October 4. Assuming baby comes on the due date, the first three weeks of short-term disability will occur in October.

November: 2/3rds pay for half the month, full pay for half the month (~$4,100)

My sixth week of short term disability will end on/around November 14. At that point I revert to full pay and use my paid parental leave for the rest of November.

December: Full pay

December is where it gets tricky, for a few reasons. First, assuming baby comes on time, my last day of paid parental leave will be December 27. However, I was informed that if you are out for 12 weeks or more during a performance period (aka calendar year), your bonus will be prorated. In my case, it would be reduced by 25 percent. At $114,000 pre-tax, I’m looking at a potential bonus base of $11,400 with adjustments up if the company’s performance is good. I got paid out over 100 percent last year, and I anticipate a similar payout this year because I just busted my butt to complete my full year’s worth of goals in nine months — so no way am I taking proration.

The most likely course of action at this time is that I will go back to work on Friday, December 14 after 10 weeks of leave. Paid parental leave has to be taken in two-week blocks, making it impossible for me to be out 11 weeks — it’s either 10 and full bonus or 12 and proration. Then I’ll opt to take my additional two fully paid weeks of paid parental leave sometime over the summer (yay extra summer vacation), and just forgo the four weeks of state FMLA (too much of a pain to find four additional weeks to be out during the year and file all the paperwork for only $600/week of pay).

All of this obviously shifts if baby comes early (or late). If baby comes early, I’ll be back at work even earlier with only 10 weeks of leave. If baby comes late enough that 12 weeks will push into January, then I’ll probably opt to take the full 16 weeks of leave (including state family leave) I am entitled to. Of course, I also have the option of letting them prorate my bonus. I do not really want to go that route because it could be a sizable amount I’m giving up; however, if we get to the end of leave and feel that it is best for everyone’s physical and mental health that I take extra time, then it’s certainly an option.

Tricky, right? Exactly the kind of stuff you want to be worried about while you’re running on two-hour bursts of sleep and caring for a newborn and toddler. Unfortunately, all we can do at this point is map out the possibilities and wait until baby comes to choose our course.

We also have to wait and see how the baby’s arrival will affect my budget. We’ve already pulled our toddler out of daycare and I’ve begun working from home full-time so the daycare, tolls, and “meals at work” line items will disappear for a few months. Gas should also come down by about half. I will have enough coming in to still cover the “fixed” expenses and credit card minimums for the duration of my leave. The rest, where it’s needed, is going to come from two places: my liquid savings account, which is at around $2K right now and the “joint” savings account my husband and I have together. I say “joint” because it’s mostly his money that funded it — but this situation is exactly what it’s there for. Once we knew we were pregnant, he started ramping up contributions and the balance is sitting around $7K. I don’t anticipate needing to use much, if any of it, if my prior maternity leave is any indicator. My parents and in-laws live nearby and are a huge help with providing meals and picking up groceries, I’m all set on nursing clothes (aside from bras, which I can’t buy until I see what size I need) and baby clothes and supplies, and I really doubt we’ll be leaving the house to dine out very much. Part of that $2K liquid savings is earmarked for Christmas so I’m also covered there.

Let’s switch over to my September budget and how well I stuck to it:

September 2018 (Budget/Actual)

Net monthly take-home pay: $4,600 / $4,600

FSA reimbursements: $385 / $385

Other income: $- / $-

Total monthly income: $4,985 / $4,985

“Fixed” monthly expenses

Mortgage/utilities/taxes: $1,000 / $1,000

Daycare: $440 / $306

Student loan payments: $600 / $600

Lease payment: $280 / $-

Wireless bill: $85 / $85

Other misc (Patreon, Netflix, iCloud): $32 / $21

Total “fixed” expenses: $2,437 / $2,012

Financial priorities

Credit card minimum payments: $190 / $190

Extra credit card payments: $- / $248

Savings (short-term, long-term, kids): $950 / $965

Total financial priorities: $1,140 / $1,403

Variable expenses

Groceries: $900 / $503

Gas: $160 / $80

Tolls: $50 / $50

Diapers: $50 / $63

Everything else: $248 / $888

Total variable expenses: $1,408 / $1,584

The “everything else” spend was as follows:

Dining out — $132

Fun Stuff: $108 — Hubby and I went to a concert out of town (he paid for tickets and hotel). This covered an Uber back from the concert and concessions at the concert. I also bought myself some new body wash and lotion from Bath & Body Works, and treated us to chocolate dipped fruit from Edible Arrangements for our anniversary.

Gifts: $175 — Shower melts for my BFF for letting me vent nonstop this pregnancy, special English breakfast tea for hubby as a thank you for being so supportive during this pregnancy, and a birthday gift for a friend’s child

Household: $300 — Housekeeping ($150) + quarterly Costco run for household essentials ($150)

Kid’s Toys: $39

Kid’s Other: $22 – set of pant hangers for toddler’s room

Meals at work: $52

Nail appointments: $60

I hope you’ll all find it as interesting as I will, seeing if and how we can skate by on reduced pay over the next few months!

Michelle is a thirty-something, color coding, tax accountant wife and mom who is just trying to do the best she can with what she has. At capacity for lattes, but always has room for help!

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