Company Stock Options and Financial Planning: What Works For You?

Your job likely offers you some form of equity compensation. Equity compensation can represent financial security and sustainability — but it also can come with a degree of risk. There are various factors to consider with compensation packages, such as your financial goals, taxes, and diversification strategies. In this week’s blog post, we go over the basics you should know.

Equity Compensation 101

Equity compensation is non-cash pay offered to employees that represents ownership in a company. This includes options, restricted stock, and performance shares. Public companies and some private companies, especially startup companies, offer equity compensation to make up for lack of cash flow and attract high-quality employees.

Employee stock purchase plans (ESPPs) are company-run programs that let employees purchase company stock at a discounted price. Employees can usually contribute through payroll deductions; this typically builds up between the offering period and the purchase period.

Restricted stock unit (RSU) plans are company stock plans offered to employees as additional compensation. Instead of paying you your entire salary in cash, part of it is given to you in the form of company stock. It is usually listed alongside your base salary when you’re hired.

Stock option plans, also known as an incentive stock option (ISO), is a type of equity compensation given to employees and executives. Rather than giving you shares of stock directly, the company might offer derivative options of the stock.

The Role Of Equity Compensation In Your Financial Plan

Where does equity compensation fit into your financial plan? To understand this, you should go over the following with your financial advisor: figure out what kind of investor you are, watch out for concentrated wealth, understand the tax consequences of your investment decisions, and understand how recent tax law changes affects your wealth. This will help you make informed decisions about how to manage your equity compensation.

Work with Treehouse Wealth Advisors Today

The right financial advisor can help you identify your core values, establish clear financial goals and create a financial strategy.

When you work with a financial advisor at Treehouse, you’ll know that you’re working with a financial advisor that understands the importance of values.

If you’d like to get started on your financial plan, reach out to our team today.

Written By

Treehouse Wealth Advisors Team

Treehouse Wealth Advisors is a women-led firm based in Walnut Creek, CA, dedicated to crafting tailored financial solutions for individuals and families. With a focus on long-term, relationship-driven approaches, we empower clients to invest their time and assets purposefully. Our team is passionate about challenging the status quo and embracing change to find better solutions.

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