This is how women can plan their finances before going on a maternity break

When Devina Choudhary (name changed) got to know that she was pregnant, she was over the moon. However after the first wave of emotions had ebbed, she felt a slight sense of trepidation as to how her maternity break would impact things on the work front. Choudhary, a freelance graphic designer belongs to the growing tribe of workers across the globe who have foregone the model of full-time employment and have opted for the freelancer life.The freelance setup has undeniable advantages, especially for new parents. Unlike the case of full-time employees, freelancers have the flexibility to tweak their working hours around their children – be it for school runs or for looking after them when they are sick. However, when it comes to maternity or parental leave, the situation is tricky for freelancers, especially women what with there being no policy or legislation that provides paid maternity leave for women who are freelancers or working in the unorganized sector.The Maternity Benefit Act, 1961 gave women 12 weeks of paid maternity leave. In 2017, the country passed the Maternity (Amendment) Bill that increased the right to paid maternity leave for working women from 12 weeks to 26 weeks—the third highest in the world. The downside though is that the law applies only to those who work in a company with at least 10 employees. Considering the majority of women in India work in the unorganized sector, only a minuscule percentage of women employed in the organised sector fall under the ambit of the law. A sizable chunk of women workers who are engaged as contractual workers, farmers, casual workers, self-employed women, and freelancers are not covered by the act.As such, for women who work as freelancers or own small businesses, maternity breaks can seem daunting and depending on the stability of their existing income streams, a proper financial plan to cover the months when income may dwindle is imperative. This is because unlike women who work as full-time employees and who continue to receive their salaries and other benefits regularly when they are on maternity leave, women like Choudhary face the possibility of having no income for months after the birth of their children.Choudhary says, “As soon as I got to know that I was pregnant, I notified my clients that I would be taking a six-month-long break after delivery. I was fortunate enough to have some clients who wanted to avail my services when I returned to work post my maternity break but in the freelance space, this is hardly the norm. I was prepared for it – I knew that some of my clients would definitely find someone else to fill my place and so I had a detailed financial plan in place in case it took me long to go back to my pre-pregnancy income levels.”Choudhary recalls calling her financial advisor within a week of getting her pregnancy test results. “It was a unique situation. While luckily, my husband has a well-paying full-time job and as a family, we were confident that his income would be more than enough for us including our baby, we knew we needed to recalibrate our financial plan because my income would be affected and our expenses would increase.”Following a strict budget, eliminating frivolous experiences, enhancing investments for long-term goals, and paying off credit card bills and EMIs were what emerged as the top priorities for Choudhary. “I knew that I could be in trouble if I left my credit card and loan repayments for later because I couldn’t say with certainty that I would immediately start earning enough when I got back to work and clearing those then could become a problem. Next, my husband and I reviewed our short-term goals and channelized some of the investments for those goals into long-term ones such as retirement and some of it into our emergency fund. For instance, we knew a holiday wouldn’t be possible for the next one year or so, and the saving and investment that we had in place for that was put into our retirement kitty.”The knowledge that Choudhary could face a liquidity crunch after the birth of her child owing to the lack of a regular paycheck during her maternity break also led her to create a separate kitty for her own needs. “I invested in a mix of debt and equity mutual funds to create a corpus that I could use for my personal needs as well as the occasional indulgences. In retrospect, I feel that was a good move because I didn’t feel incapacitated by the sudden loss of income after my son was born.”Preeti Zende, co-founder of Apna Dhan Financial Services says, “Women who have their businesses or are freelancers can decide when to resume their business if they have a good financial backup. Those who have a team to look after their freelance or small business in their absence need not worry so much. However, if you are a woman handling the business by yourself or work on your own then your financials may get affected till you are on a maternity break.”Zende suggests, “You have to plan things well in advance. If you plan to take prolonged maternity leave or don’t intend to go back to work for 3 years or so then you can use hybrid funds and ultra short debt funds to accumulate some amount to take care of your personal and office expenses. If the horizon is less than 3 years then you can use arbitrage funds and liquid funds. If you have only a year in hand, then use a simple bank RD to accumulate the required amount with aggressive savings.”Action pointsCheck your existing insurance plans to ensure you have enough coverage for yourself and your partner and your soon-to-be-born child.You can save a lot of money by buying baby items such as clothes, strollers, and baby care equipment from thrift stores. Second-hand items can help you go easy on your pockets and it is a smart move because most baby items become redundant in a few months/years.This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.