Lifestyle change – Planning a family

The following is a guest post by Betsy Falwell.

It was the evening of my last day of maternity leave. For 16 blessed weeks, I’d been given a reprieve from the day to day grind of TV news, instead basking in the glow of my newborn daughter. In the morning, I’d return to the office for the first time in four months. It wasn’t a moment I was anticipating with any sense of excitement. Honestly, the only reason I was going back to work at all was because we were flat out broke. Between our mortgage, hospital bills, and the cost of feeding, clothing, and diapering a tiny human being, we’d run through our savings before our bundle of joy sprouted her first tooth.

That’s when I made a financial resolution: When it was time to expand our family yet again, my decision whether or not to return to work wouldn’t be limited by our financial situation. And then I got to work.

Will The Government Help?

If you live in the United States, you can forget about asking Uncle Sam to help bridge the gap in your finances after the birth of a child. The U.S. is one of the only industrialized nations in the world that does not offer compulsory maternity leave; not only that, the U.S. lacks an official policy for paid maternity leave as well. While women can take up to 12 weeks off following the birth or adoption of a child under the Family Medical Leave Act (FMLA) –  a policy that only applies to women who work for certain companies – they aren’t entitled to receive any compensation during that time. Compare that to:

  • Italy:  five months maternity leave at 100% pay, with the option for an addition six months at 30% of salary; mothers who work full-time are guaranteed a minimum two-hour rest period per day while on the job
  • Australia: 18 weeks paid at the national minimum wage
  • Norway: 42 weeks at 100% compensation, or 52 weeks at 80% compensation; may be split with the father

Refinancing Your Mortgage

Refinancing your home loan – with all the paperwork, appraisals, and meetings with your lender or a mortgage broker – can seem like the last thing you have time for while planning for the arrival of a child. That’s why it pays (literally!) to reduce your payments before you see the two pink lines on your (or your wife’s) home pregnancy test.

For my family, the difference between me working full time and part time wasn’t all that much – maybe a couple hundred dollars a month. That’s where a refinance came in. Using a mortgage calculator, we were able to see just how much we’d be able to save on our monthly loan payments by taking advantage of significantly lower interest rates than when we first purchased our home. The result? A saving of more than $200 a month.

Planning For A Single Income

While I simply wanted to reduce my workload from 45-50 hours a week to part-time status after my daughter was born, I had plenty of friends who wanted to leave the rat race entirely. Others found the added financial burden of a new family member was putting a severe crimp on their finances. Serious changes needed to be made.

While 30- and 15-year fixed mortgages are the most traditional type of home loan, they’re not the only option if you’re looking to refinance. Interest only loans allow you to pay just the interest on your mortgage – without putting a penny to the principal, unless you choose to make extra payments – for a set period of time, usually five to ten years. Likewise, adjustable rate mortgages, or ARMs, also give you flexibility. These loans start out with a low introductory rate – typically below even the best rates you’d find on a fixed mortgage. The introductory periods can be as short as three years, as with a 3/1 ARM, or as long as ten years, as with a 10/1 ARM. Once the introductory period ends, your interest rate will be reevaluated – usually every year – in accordance with market values.

While interest only and ARM mortgages may not be the path to long-term financial stability – what you don’t pay on the front end, you’ll pay on the back end – they can give you extra money right now.