Maternity leave When DMP is right choice

Summary: Maternity leave - This paper explores the financial implications of leaving employment temporarily or permanently, to start maternity leave, and argues that a Debt Management Plan (DMP) may be a necessary solution.

Maternity pay

The arrival of a child should be cause for rejoicing and (bleary-eyed) excitement. For some, the occasion is undermined to some extent by financial worries. Maternity arrangements may vary a little from employer to employer, but one thing is consistently true - overall, income will reduce. Such a reduction can have an obvious effect on our ability to meet all our financial responsibilities.

Prioritising

Everyone needs to prioritise their expenditure. Everyone needs to eat and most people need a roof over their heads. Then council tax payments, utility bills, travel to work costs are also essential. Most of us then need something for phone/TV, and one or two extras. It's only then that we can calculate what we have left for debt repayments. When income drops it's important to understand the implications for priority and non-priority outgoings.

Uncertainty

The other factor with maternity is the potential uncertainty of when/if there is to be a return to work, possible reduction of hours and any childcare costs. There may be some entitlement to benefits, but in all this there are a number of uncertainties that makes financial planning problematic.

Can a DMP help?

One of the key advantages of most DMP's is their flexibility. Rather than get ourselves into difficulties with rent or mortgage or council tax, it may be wiser to look to a DMP as a way of reducing expenditure at least in the short term. This may provide us with an opportunity to meet all other outgoings and still be able to live properly.

A warning

Entering a DMP involves breaking a contractual arrangement with our creditor(s) as we are paying them less than previously agreed. We shouldn't do so lightly and such a plan is likely to involve a damaged credit rating for some years. That sad, a DMP will certainly be preferable to missing priority payments and may well be better to drawing further credit that we know we are going to struggle to repay.