How to budget on one income during parental leave

The best time to plan is during pregnancy, while both incomes are still coming in.

Know what you'll bring in

List all the income you'll have during leave:

• The working parent's take-home pay
• Any paid leave from an employer
• State-paid family leave benefits, if your state has a program
• Short-term disability payments
• Paid sick days or vacation you plan to use

Note when each one starts and stops. Some benefits have a waiting period, and some state checks can take weeks to get there after you apply.

List what you'll spend

Start with your current monthly budget. Then add new baby costs and higher health insurance premiums. Subtract things you'll spend less on, like eating out for lunch at work.

What’s the difference in pay?

Compare your monthly income during leave with your monthly expenses. The difference is your shortfall.

Example: Your family normally brings home $5,200 a month. During leave, one parent gets state benefits, and the other keeps working, so your income drops to $4,000. Your expenses, with baby costs added, are $4,600. That's $600 more that you need to cover than what you bring in. Over three months of leave, you'd need about $1,800.

Build a “leave fund”

Once you know what you’re looking at, start saving for it. Divide the total by the months left until your due date.

In the example above, if you have six months to go, saving $300 a month would cover it. Keep this money in a separate savings account so it doesn't get spent by accident.

If you can't save the full amount, every bit helps.

Other ways to save

• Practice living on one income now while you have two incomes and put the extra away for savings.
• Cancel subscriptions that you won’t be using while you’re out of work.
• Consider increasing your auto insurance deductible, changing your internet plan, and saving in other areas.
• Meal prepping is a great way to make sure you’ve got food cooked and ready for days when there’s no time or energy for it.

Cut your bills

Having a baby can change what you owe and what you qualify for.

• If you're on an income-based repayment plan, you can update your information without waiting for recertification.
• Update your dependents with your employer to increase take-home pay and reduce tax liability.
• You may qualify for programs like WIC, SNAP, or Medicaid, even if you didn't before.

Don’t expect things to go to plan

Babies don't always cooperate with what you’ve got planned. A longer recovery or a medical issue can stretch your leave. Know which bills you'd pay first in a pinch. If you fall behind, talk to your lenders early and ask about hardship options before you miss a payment.

What not to do

Skip the credit cards if you can. If you have to borrow, a low-interest credit union loan or a 0% offer you can pay off quickly is a safer choice.