Equity Compensation: 4 Steps to Making Smart Decisions

1. Understand the Structure of Your Equity Compensation

Equity compensation can sound exciting—but understanding the details is key. When does it vest? How much are you getting? What type of equity is it? Equity looks valuable on paper, but if it’s locked up for several years, the company’s value—and what you actually receive—could be very different from what you imagined when you signed on. 

2. Consider Your Salary and Cash Flow

It’s important to look at your salary alongside your equity compensation. Can you live on your cash salary alone? Relying solely on equity as income is risky because its value is uncertain. Proper financial planning ensures your day-to-day expenses are covered while your equity grows. 

3. Plan for Diversification

Many people aren’t sure how much company stock they should own and how it fits into their overall financial plan. Diversification is key—knowing when to liquidate stock options or RSUs and how to reinvest the proceeds can make a significant difference in your long-term financial health. 

4. Get Guidance

Life gets busy. Not everyone has the time or capacity to manage equity compensation themselves. A financial advisor can help simplify equity compensation planning by guiding you through tax considerations, selling windows, and diversification strategies. With professional guidance, you can feel confident that your equity is working effectively as part of your overall financial future. 

In short: understand your equity compensation and your cash flow, plan for diversification, and get the guidance you need to optimize, not obsess.

At Truepoint and Commas, we have a depth of experience helping clients navigate equity compensation packages from a wide variety of companies including P&G, GE, Amazon, Google, Microsoft, and more. Whatever your situation, we can help. Let’s talk.