Navigating Equity Compensation
Commas advisor Jordan tells us that navigating equity compensation is all about making decisions that will give you the greatest likelihood of achieving your long-term financial goals. There can be a lot of complexity around taxes and what to do with the company stock, but he distills it down to three steps to focus on.
“Equity compensation is when people get paid in company stock. And when that happens there’s a lot of complexity around taxes and what to do with that stock, but really you want to distill it down to a few things.
First is how do I make sure that I have enough cash on hand to pay any taxes that are associated with exercising and liquidating the company stock that I have.
Then, you want to set up a plan to make sure that you’ve got some money to pay for any short-term goals. A lot of clients I work with want to use the equity that they received to buy a house, or to fund a sabbatical, or to go on a trip, and so you want to make sure that you have money available to do those.
The third step is thinking about your long-term wealth. So are we able to take some risk and to continue to hold on to this stock in order to grow our wealth over time or do we want to pull some of the risk off the table by selling the stock and making sure that we’re able to achieve our goals? It’s all about making decisions that will give you the greatest likelihood of achieving your long-term financial goals.”