How to Plan for Maternity Leave When You are Self-employed
The entrepreneurs guide to navigating parental leave.
Congrats! You are having a baby! As someone who’s self-employed, you not only have the normal parenting fears and questions like “will I ever sleep again?” but also the big question mark around parental leave. How much time can I take? How much time will I need and want? Will my business survive without me? And often the most concerning - how will I afford this?
I get it and so do many others. Millions of workers are leaving the corporate workforce to happily become self-employed, and many others have been forced to make the move. Self-employment certainly carries its perks, but those of us who are self-employed also miss out on some crucial benefits like health care and parental leave (although paid parental leave isn’t available to most of the US workforce).
I’m currently planning my second maternity leave as an entrepreneur and it’s no small feat. I learned a lot from my wins and mistakes the first time around. I’ve also helped many self-employed clients plan for their maternity leaves, and I’m excited to share this step-by-step process for making it happen.
If I’ve learned anything from motherhood it’s that every single person has their own journey, so your parental leave will look unique to you.
Before we dive in, it’s important to acknowledge my significant privilege. I have a partner to share in the financial and childcare burden of having a child. I’m white, able-bodied, straight, and the list goes on and on. These all provide me with tremendous privilege and have a great impact on my finances that others don’t benefit from.
The good news and the bad news.
There are many perks to starting a family when you’re self-employed. First and foremost, flexibility! You get to skip all the rigid rules of corporate culture and create your life post-baby however works best for you. You can technically do as much or as little work as you like, whenever you like and you have no boss to answer to.
But in reality, we often don’t feel that freedom. There are also some major downsides. There’s no paid parental leave and often not an opportunity to completely check out of work for months at a time. You are the boss. And if you want maternity leave, it’s on you to carve out the time for yourself while somehow keeping your business flourishing.
Plan your self-employed maternity leave.
What do you envision for your maternity leave? Some know they want to take off a certain amount of time or have an idea of how and when they want to work during their time off.
We can create whatever we want. Take some time to make a “plan.” I put the word plan in quotes for a reason. Plans change, especially when there are babies involved, but it’s really helpful to start somewhere.
With my first child, I didn’t know much about being a new parent (I still don’t!), but I knew that I wanted the flexibility to play things by ear. I imagined that I would probably enjoy working a little even during my maternity leave, but I also wanted to make sure I didn’t have to work on anything urgently. This time, I’m going big. I want the option to not work for three months.
Create your dream team to keep your business running (and even flourishing) while you’re on maternity leave.
What needs to get done while you are on maternity leave? There might be things you can prepare before you take time off work, or you might want to make sure you have extra support lined up to keep things running (and even flourishing) while you are away.
If you already have a team, will the team be working extra hours while you’re out? Will they be taking on additional responsibilities? These are important conversations to have and I highly recommend kicking off this new plan before the baby comes, if possible.
My maternity leave wouldn’t have been possible without my incredible dream team which consisted of help from family and childcare professionals, as well as support in my business.
Before my first child, I had a really hard time delegating and was never able to let go of certain parts of my business (even parts that I wasn’t good at!). Hiring someone to take over certain roles while I was on maternity leave was one of the best things that’s ever happened for my business. And I don’t know if I would have been able to do it if I didn’t have that push.
It’s okay to let go of things too.
The other side of getting support is to let things go. This can apply to your personal life and your business. Things that are important for your business and are moving you towards your goals are things you want to prioritize getting done, either before the baby comes or through support and delegation.
There are also plenty of things that don’t really need to get done. It’s helpful to take an honest look at all the activities in your business to see what needs to continue and what you can let go of while on maternity (and potentially even after).
I’ve found that having a baby is a great excuse to “prune” your life of everything that’s not a “hell yes!” If it’s not moving the needle, it’s not worth prioritizing, regardless of your new baby situation.
What financials go along with this plan?
With all this in mind, we can get working on the numbers - and the numbers are important. We can have plans that sound great but if they aren’t workable financially, we’ll have to reconfigure them.
Tally your expected income.
Let’s start with revenue - the money coming in. Do you expect your income to change while you are on maternity leave? In a service business (especially when you are the service - aka me), revenue can be greatly affected by time off.
For this maternity leave, I’m being very conservative and planning on no revenue coming in during my three months off, but that might not be the case for your business. Take a tally of all the revenue you can reasonably expect to earn during your maternity leave.
Calculate your business expenses.
Then, map out your expenses. Some expenses might decrease during your maternity leave as you might not be going out for business meals or traveling to conferences, but if you plan having your team work more hours, that will increase your expenses.
If you are looking for a place to map all of this out, I highly recommend our business model template. You can plug in your expected revenue and expenses and see how it all shakes out.
What about your personal expenses?
It’s also important to factor in your personal expenses. We can do that by making sure to include how much we pay ourselves. If you pay yourself a salary and your family depends on that income, you will want to incorporate that into your maternity leave financial plan.
The first time I planned my maternity leave, I only factored in the lost revenue and business expenses. This worked out okay because we were able to cover our expenses without my business income. This time around I’m including my monthly salary in my calculation because we need it in order to cover our personal expenses.
How much will it cost to invest in your self-employed maternity leave?
After running the maternity leave numbers for your revenue, business, and personal expenses, use it to map out the specific months you plan on taking maternity leave. Here’s how the math works:
Month #1: Revenue - Business Expenses (don’t forget taxes and your salary) = The Total Cost of Month #1
Take your expected revenue in the first month of maternity leave and subtract your business expenses (including taxes and your salary) to get how much you will need to invest in your maternity for that month. If each month looks pretty similar, you can run the equation for one month and multiply it by how many months you plan to take off.
Let’s say your business is going to earn $5K per month while you are on maternity leave and your total expenses are $10K (including taxes and your salary). You will want to invest around $5K in each month of maternity leave. If you plan to take three months of self-employed maternity leave, you should aim to invest $15K.
How to work the logistics of the financial plan.
We know how much we need to invest in order to take the self-employed maternity leave we want. Next, let’s make it work.
Start saving up for your maternity leave.
I recommend setting up a maternity leave sinking fund in an online savings account so you can start putting money aside. The sooner we start planning, the easier it will feel to reach the goal.
If we continue with the $15k example, we’ll want to look at the business financials and determine where it’ll come from. If you have six months until your maternity leave begins, you will want to earn an additional $15K (after taxes), decrease spending by $15K, or use a combination of the two.
You can also decide to use other savings to invest in your maternity leave.
What if the plan isn’t feasible?
If finding the additional money you need to invest in your maternity leave doesn’t look feasible, you are not alone. Most of our plans will need to be adjusted for our financial realities. Hopefully, someday there will be paid leave available for the self-employed.
Here are some possible solutions:
Look for ways to decrease business expenses (in advance and/or during maternity leave)
Look for ways to decrease personal expenses (in advance and/or during maternity leave)
Restructure your maternity leave to be shorter or include plans to earn revenue
Look into other ways to earn additional income
The logistics of your “paid” maternity leave.
You have your plan and you’ve set aside money into your maternity leave fund. Now, how do you go about using it?
It’s helpful to view your maternity leave fund as your salary during maternity leave. We have a tendency to only want to transfer over what cash we need in the moment. but the slow drip from savings can actually feel really painful.
It’s a much more powerful feeling to be proactive and transfer what you plan to spend for the month from your online savings account to your checking account. If you are worried you’ll spend the money too quickly, break it up into a weekly transfer. If you want to make it as simple as possible, set up a monthly transfer.
Set up automatic transfers to go to your business (for business expenses) and personal accounts (for your salary) as planned.
There’s the step-by-step process to planning for a self-employed maternity leave. This process can and will take time, so the earlier you start thinking about it and planning, the easier it will be.
Even the best laid plans need adjusting (especially when there are babies and businesses involved) so don’t set it and forget it. Check in on your plans frequently to make sure you are on track. Once you start seeing your progress, you’ll be excited to track how far you’ve come and how far you have to go to reach your maternity leave goals.