The first thing I did as soon as I found out I was pregnant was… create a savings plan. Like, before even telling my husband a little peanut was on the way.
(But that’s mostly because I wanted to tell him in a special way and be realllllly sure I was actually pregnant since I had found out SUPER early, so I waited about a week to tell him. More on that whole story here!)
I know. A savings plan doesn’t exactly scream, “YAY, we’re expecting!”
But it was a way for me to start logically wrapping my head around this BIG, big change. And as a freelance writer, I knew I wanted to be prepared financially to actually be able to take some time off work and be present with our baby.
… We’d also JUST bought a house two months before getting pregnant, and unexpectedly had to pay several thousand dollars for knee surgery for our dog a week before. The timing was super chill.
Our savings accounts were hurting, to put it lightly.
To put it realistically: They were all but drained.
I’ve shared before that I expected it to take a little longer to get pregnant, so as soon as I got that positive test back, it was like a kick in the rear to get our finances figured out, and fast.
With a 9-month window for our deadline, I decided we could (and should, and WOULD) rebuild our savings accounts so we could feel financially confident by the time the baby arrived.
I know new babies are such a joy! They’re super cute and an enormous blessing, but the huge change (and sleep deprivation) that comes with growing your family can also take a toll on relationships. I didn’t want our finances to be one more stressor in an already emotional time of adjustment.
So I got to work, built a plan, and then eventually told John we were prego… and had a new budget. (Not quite so close together, but you get the gist.) Luckily, the guy loves a good budget meeting and was on board.
Whether you’re expecting a new babe, want to take a sabbatical or extended vacation, or need to take a longer step away from your business for another reason… Here are a few ways to plan financially for an extended leave without stressing the cuss out.
1. Give yourself as much saving runway as possible.
Obviously pregnancy made knowing our runway easy. We had 9 months to get our *ish* figured out. It was extra-nice planning-wise that my due date coincided with the end of the year, so we knew we had the rest of 2020 for our savings timeline.
If you’re not expecting, try to give yourself at least a few months to save up a cushion, but it also depends on your own finance goals and needs! If you have decent savings and just want them a bit more padded, you’ll need less time.
We like two have two savings accounts: an emergency fund with at least 3 months of living expenses (which was nearly empty after dipping in for our house down payment), plus a “big purchases” fund for anything non-emergency (travel, concerts, furniture, or any other fun “bigger” purchases). We usually like to keep a few thousand dollars in there… but it was also pretty empty after our beginning-of-the-year expenses.
So, we knew we’d probably need our FULL runway.
I took the total amount we’d want saved in each account and divided it by 9 months, and we committed to putting that amount into each savings account every month through the end of the year.
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The good news was that I had a few unexpected extra business opportunities that padded my income this year, so we were even able to put more than our planned amount into our savings accounts a couple of months. This allowed us to wrap up our “goal amounts” a couple of months early.
2. Map out your financial priorities.
We’re pretty intentional about our retirement savings and ideally prefer to max out our IRAs and John’s 401K…
… But, when a baby’s coming in a few months and you have next-to-nothin’ in your savings, some things need to be put on pause.
Yep, we actually paused contributing to our IRAs while saving this year. Let me say here: I’m clearly NOT a financial expert or advisor! I did Dave Ramsey’s Financial Peace University a few years ago to get out of some crazy credit card debt… So, I’m obviously not a professional in this area and I’m not telling YOU to not save for retirement.
But—I share this to tell you that sometimes you might have to sacrifice some important things short-term in order to reach your goals.
Retirement savings is still extremely important to us, but we knew that a large portion of our income was going toward those accounts each month, and to save a lot of money quickly, it would help to put that money toward our savings accounts.
When I wrote down our savings plan, I wrote a list of our priorities (that I then ran by John and he agreed with), in order of timely importance:
- Rebuild our savings
- Complete our flooring project
- Return to contributing to all of our retirement accounts ASAP
The flooring project was another thing on our priority list because it was something we’d already started and knew we wanted to finish before a baby was added to the mix. (I just couldn’t imagine ripping out and installing new floors with… a newborn. Call me crazy.)
The positive is: We were able to continue contributing to John’s 401K (so at least one of the retirement accounts was still growing) and like I mentioned, we finished our savings and floor project earlier than expected, so we could go back to saving for retirement sooner than planned.
I feel like the real FiNaNcE smarty-pants will look at us sideways for stopping our retirement contributions for a few months, but it gave us the gift of being able to rebuild our savings cushion so much quicker. To me, that security was worth it.
3. Say “yes” and “no” strategically.
This goes back to priorities: We wanted to take a babymoon this year, and so we made sure to plan accordingly with our finances and make it as affordable of a trip as possible. That was an important yes for us.
There were also about a million other house projects I would have liked to run with this year with all of our time at home, but knowing we had an aggressive savings plan and other priorities, I had to recognize that they could wait.
Ever heard the phrase, “If it’s not a hell yes, it’s a hell no”? That’s a pretty good motto when you’re saving money for an extended leave away from your business. Use it and use it often.
4. Be willing to try new things in your business.
This year wouldn’t have been as successful as it was if I hadn’t revisited some of my pricing and offers. I used to only charge hourly rates for my writing work, but after working on a few larger projects, I realized they were significant enough to charge a much heftier flat rate because of the value they were providing the client.
Shifting my rates and offer suite was really scary. I wasn’t sure if people would see the value in paying—but they did! And they appreciated the work so much that most said it was well and above worth the price! (Imagine if I’d implemented those changes sooner?)
Likewise, planning for time away pushed me to hire someone, which yes, is an expense. But having some support increased my bandwidth to be able to take on even more lucrative projects… Totally worth the expense!
If nothing else, planning for an extended leave gives you the excuse to at least try new things, whether it’s a new pricing model, bringing in help, or creating new offers that could generate passive income.
5. Trim non-essential spending as much as you can.
I’m going to be honest here… We didn’t do *super* great with this one, and we’re playing catch-up now. We were doing fairly well with our income this year and were so ahead on our savings plan, so we kinda just…didn’t pay as much attention to how much we were spending on things like Whole Foods grocery delivery and online shopping. (Those baby clothes will GET you!)
And now, going into my maternity leave next month where my income is about to somewhat halt, I’m seeing we’ve gotten into a couple of bad habits.
I created a budget for January (seriously, college Audrey who would chuck her credit card at EVERYTHING would wonder who this person even is nowadays) so that we can focus on our essentials only. Our bills, retirement, and groceries are the essentials, and I gave us a low-ish (or, lower than we’ve become accustomed to) budget for anything extra.
It’s not technically going to be a “no spend” month, but definitely a very, very low-spend one. And then we’ll evaluate and adjust for February and March, until I’m back to a normal-ish work and income routine.
Just because we’ve saved up all of this money this year doesn’t mean we want to blast through it. Our intention is to just live more leanly on John’s one income (plus my trickle income) during the next couple of months.
If we have to dip into savings? It’s not the end of the world. We know we can rebuild—but we don’t want it to be our reflex, and we definitely don’t want to drain them again.
And…that’s pretty much it!
It’s certainly not a perfect plan, but we’ve learned so much as we’ve prepared for this time with a new baby and wanting to feel as financially unburdened as possible. I hope this is helpful if you’re prepping to take an extended leave in your own business… And if you have any financial planning tips for entrepreneurs taking time off, please leave them in a comment below! (Seriously, I would LOVE to hear them!)