When to Sell Your Company Stock

For the last 2.5 years I've been working for Zoom, which before April 18th of this year was a privately held company. Before Zoom, I had always worked for large public companies. Now that we are public I've been doing a lot of research about when to sell company stock. Prior to my current gig, anytime I had company stock I was using it to pay for grad school, pay off debt or build an emergency fund. This is the first time that I have company stock and all those things are behind me.

I'm fortunate to have many friends and mentors who have gone through this before and I've been relentlessly bugging them and getting their advice. I've also been doing my own research linked out below to some of the best resouces I've found on the topic. I've always felt the best financial advice is not easy to find so I wanted to share what I've learned about when to sell your company stock.

FRIENDLY REMINDER THAT I'M NOT A FINANCIAL ADVISOR, PLEASE CONSULT ONE AND AN ACCOUNTANT AND MAYBE A LAWYER. ANY SPECIFIC NUMBERS OR PERCENTAGES OF HOW MUCH TO SELL ARE JUST EXAMPLES, EVERY SITUATION IS DIFFERENT.

But....here are some guiding principles about when to sell your company stock.

If you have debt, sell baby sell. Earlier in my career I primarily used any stock I had to do two things, pay off debt and to build an emergency fund. The general conservative financial wisdom would seem to agree that this makes the most sense not just for stock but any sort of windfall or extra income.

Assuming you have no debt and a solid 3-6 month expenses in an emergency fund. Here are some other ways you should think about your stock ranked in order of most conservative to risky.

Sell everything as soon as you can and diversify. Even with no debt, there is solid data to back this one up, check out this article from Wealthfront. Another article walking through why this could be a good idea.

Make a plan and put it on autopilot. This takes the emotion out of when and how to sell. Emotion seems to be the biggest enemy to wise stock selling decisions. There are so many variations, but the key is to decide in advance how much stock you want to sell in what time period. For example you can have a plan to say that 4 years from now I want to have left 25% of a specific stock grant, so you would schedule regular amount of shares to sell each month to sell 75% of your shares. You could also say you'll sell everything over 12 months. The possibilities are endless, but should be influenced by your networth, what your financial needs are in the near and long terms as well as your risk tolerance.

You don't get rich by diversifying. I had a mentor and someone I really respect tell me this. I think I would modify it a little to say "you don't get REALLY rich by diversifying". Think about the employees who followed all the previous advice at Apple, Google, Facebook and all the other stock super stars. They got rich, but not nearly as rich as the would have had they held on for a long time. Most companies are not going to be in that category...but some will be. General conventional financial wisdom suggests you should almost never have more than 10-15% of your network tied up in your company stock. Personally, I think the key is being able to be realistic about the risk and comfortable with it. Can you take on that much risk? Are you more worried about winning big or losing big? Do you have enough money outside of the stock position to do what you want to do for the next 5-7 years? Any big purchases you need to make in the near future? How are you tracking for retirement, kids college savings etc?  If you are in a solid position to have a concentrated position in your company stock and want that to be a high risk/high reward part of your portfolio, then that makes sense.

As I've been talking to experts on this topic and reading up on my own, I keep coming back to one important thing to consider. No matter what you decide to do you need to make a thorough enough and smart decision that no matter what happens with the stock price you can look back and maybe not be happy with the outcome, but be happy with your decision.

In my opinion, what it takes to get to that place is to have a solid plan, get good advice, be realistic about your risk level and have a solid financial foundational.

Beyond an Emergency Fund: Making More Money with a Financial Cushion

As I was considering leaving my last job, which had a very generous 401k match, I realized that it was unlikely that my next company would have as generous of a match. As soon as I decided I was serious about finding a new employer, I cranked up my contribution to 50% of my salary until I got the full match in a few short months before I quit. We lived off some extra savings we had set aside to be able to pay the bills. That extra savings we lived off of, essentially made us $1,000's of dollars.

Over the past few months, I've noticed even more places that if you have some extra financial cushion, you can use it to make even more money. This is good motivation for having a cushion beyond an emergency fund. I'm talking about money set aside not for emergencies...but opportunities. This principle reminds me of this quote from the Richest Man in Babylon.

“The man who became of his understanding of the laws of wealth, acquireth a growing surplus, should give thought to those future days. He should plan certain investments or provisions that may endure safely for many years, yet will be available when the time arrives which he has so wisely anticipated.”
― George S. Clason, The Richest Man in Babylon 

Here are a few ways I've seen this in action. 

1. ESPP (Employee Stock Purchase Plan). If you work at a publicly traded company and they offer this is a perk, if you can do without 20% of your salary for 6 months, you'll get a >15% guaranteed return on that money you set aside. Read this link for the details on how it works.

2. Exercise early options. A very tech example, I know, but if you believe an IPO is eminent at your company you can exercise early and lock in long term capital gains and save a lot of money in taxes. Read more here.

3. Pay in advance discounts. There are many products, like car insurance, where if you pay in advance they give you a discount.

4. Strategic charitable contributions. Consult a tax professional, but especially if you give a regular percentage of your salary, there might be some tax advantages to paying for the next year in December of the previous year depending on how near you are to exceeding the standard deduction. 

5. A great deal. This is a very dangerous one, but if used with constraint and it's legitimately something would have bought eventually, the financial cushion an let you pounce on a great deal.

6. Tax moves. The most common way is making a contribution to a traditional IRA or pre-tax 401k, but you might be surprised at the answer if you have an accountant and ask them the question. "How could I move some money around to lower my tax bill?".

Bottom line, if you can set aside some money apart from your emergency fund for opportunities, I'm confident each year you'll find more ways to have even more cash in your pocket that year. 

Disclaimer...these are just some ideas, consult a professional

How to Always Get the Best Deal on a Car Rental

This post is going to be short, but this process will consistently save you lots of money on car rentals. I've used it so many times to save me hundreds of dollars, so felt the need to share it. I used this tip yesterday to save me $50 bucks. Warning, this only works if you have a Costco Membership.

Step 1. Go to Costco Travel and book a rental car that works for you. This work best if you do it as far in advance as you can.

Step 2. Every couple of weeks check to see if the prices on Costco Travel have changed. For those of you that are not aware, rental car prices can fluctuate a lot.

Step 3. If you find a lower price, book the new car rental. You now have two reservations.

Step 4. Cancel the original one. This is where Costco comes in, there is no money down to book a rental and no penalty for cancelling at any time.

Step 5. Repeat steps 2 through 4 until your trip.

Enjoy!

The Decision to Finally Start Using a Robo Advisor (Wealthfront)

I feel like I've been stalking Wealthfront. I've been following the company for years. Wealthfront is a Robo Advisor. In other words they do what a financial advisor would generally do but in a automated, less expensive way. You give them your money, they ask you a bunch of questions, you tell them your risk tolerance and they invest it in a mix of stocks, bonds etc using software and algorithms.

Ever since I got my first big boy job, I've been a student of personal finance. For a long time though, after learning the basics, my wife and I were focused on cash flowing grad school, paying off any debt and building an emergency fund that could last six months. After all my research I believe those are important steps before investing (besides your 401k). I also believe that looking for low fee, long term investments are your best bet for building wealth through investing. Even after we had a little bit of money to invest, I was hesitant, but at the beginning of the year decided to start investing in Wealthfront and here is why.

1. Their executives/company seem to believe in sound financial principles. I follow their executives on Twitter and read their blog. After consuming their content for years, I believe their leadership teams investment philosophies are pretty aligned with mine.

2. I was not doing a good job on my own. While you can do a lot of figuring out what your risk tolerance is on your own and buy into a bunch of different stocks and bonds etc (which can be cheaper), I just was not doing it. It took too much time. Wealthfront makes it pretty easy. I had more than I needed for my emergency fund sitting on a online bank account making a lowly 1.5% interest. It was time to put that money to work.

3. The first $15,000 is managed for free. That takes a lot of the risk out of trying it, so at the beginning of the year I gave it a go. It's actually the first $10,000 is free, but if you sign up with someone's referral link they get $5,000 more managed for free and so do you. Shameless plug, if you need a referral link you can use mine.


How's it going so far? Not bad, but I put my money right before the last correction, so I'm down a little but not much. Does not bother me though, I'm in it for the long haul and will continue to put money in each month. Wealthfront has been really easy to use. Happy with my experience so far.

I'm interested to learn about other people's experiences, so please post it in the comments.

The Impact of an Emergency Fund on Your Career

A month or so ago I woke up at 6:30am to make my son a bottle when my phone started blowing up with text messages. One said "no way!" another just said "Microsoft". I read between the lines and quickly opened my work email to read about how Microsoft had just bought LinkedIn. As I sped read the email, my first thought was about whether or not I would lose my job.

I paused after this thought to gauge my feelings and surprisingly enough I felt very calm. A big part of why I felt that was because after I finished my MBA, my wife and I made it a priority to have an emergency fund of 6 months of our expenses.

Now, I have not had this emergency fund for that long, but already it has impacted my career in a positive way by giving me peace of mind as my company goes through big changes. I had enough going through my mind that day without having to worry about feeding my family if the worst case scenario would have happened, which it did not, thankfully.

Here are a few more ways having an emergency fund could impact your career.

1. It can make you more willing to take risks. I believe you'll take more intelligent risks within your company if you're not constantly worried about getting fired and not being able to pay the bills. It can also give you the confidence to take on a new role or maybe quit to try a different company that's more risky.

2. It can prevent you from getting into an ethical mess. Fear of losing your job for financial reasons is stronger motivation than you might think to turn a blind eye to an illegal or unethical situation at work. If you feel financially confident to walk away, you'll be less likely to compromise your values if that unfortunate situation arises.

3. It can relieve stress, which makes you more productive. For the majority of Americans money is a significant source or stress. If you can take that out of the equation you can be a better, happier and more productive employee.

Just a few thoughts, if you have other ideas on how an emergency fund could impact your career, please share in the comments.

6 Important Financial Steps to Take After Having a Baby

So.....according to CNN it will cost $245,000 to raise a child in the US. While that sounds a little high, it's a for sure thing that having a child is going to increase your expenses. Ever since my wife got pregnant, I've been thinking about how our little one might impact our finances and what I can do to prepare. After researching the topic, I think there are 6 basic financial steps you need to take after you have a baby. 

Add the baby to your insurance. If you have insurance through your company, many insurance providers will require that you do it within 30 days of the little guy or girl being born. Do this on time to make sure hospital expenses for the baby will be covered and you'll have continued coverage

Update your W-2. There are some serious tax breaks for having a child, why wait until the end of the year to get them and let Uncle Sam earn interest on your hard earned money? Update your withholding to put more money in your pocket now. Use this calculator to help figure out what the right amount of withholding might be for your situation.

Buy life insurance. If you already have it, you might want to increase it, especially if you are the primary bread winner. If something were to happen to you, you would not want to put your spouse and child in such a difficult financial position.

Open a 529 College Savings account. No matter what higher education looks like in 18 years, it'll probably cost money. 529 savings accounts are a fantastic way to grow college savings for your little one tax free. Check out this Forbes article with details.

Create a will. This one is no fun to talk about, but do you really want to leave it up to a state government to decided what happens to your child and assets in the worst case scenario that something happens to you and your spouse.

Re-do your budget. There are new expenses, new tax breaks and now you're saving for your child's college. It might be a good time to revisit your budget and make sure everything is aligned.

If you think I might have missed any important steps, please add them in the comments!

How to Get Your Finances in Shape After Business School

I loved budgeting and financial planning before business school, but once the cash stopped flowing during those two years, it was a lot less fun. I started working again this summer and have spent time recently whipping my finances into shape. This post is a summary of many of the things you need to do or think about after business school to get your finances back in shape.

Remember, I'm not a financial professional by any means, this is my personal opinion and not that of an expert. Though, I have included some ideas from many of my brilliant classmates from the BYU MBA class of 2014. Hopefully this post will give you some things to think about and link to some resources that will be helpful.

Here are some tips to get back in shape. Not in order of importance.

#1 Maximize your use of all the benefits at your new job. Read the fine print of the benefits package. Can you expense your cell phone? Home internet? Gym membership? You might be surprised at some of the lesser known benefits that will help your bottom line.

#2 Live like you are still a student. This one is hard. Once you get that first paycheck you can all of a sudden remember lots of things that you can't live without. The longer that you can live like a student, the better. Money should always feel a little tight, no matter how much money you make, if you're doing it right.

#3 Use online tools like Mint.com to track spending. Which tool is not as important as having some system that lets you see your finances aggregated across all different types of accounts. If you can't easily answer these questions below, then you really need one.

As of today, what is your net worth?
How much do you spend a month on average?
How much in fees have your banks been charging you this past year?

#4 Save money. Most "experts" recommend you try to save 10-15% of your salary. You should have a set amount each month that is going straight into a savings account.

#5 Rebuild emergency fund. 6 months to 1 years worth of expenses in a relatively liquid account is what's recommended. Though it's tempting to pay back all your student loans first, your interest rates on your loans would be relatively low compared to the kind of debt you would have to take on if you lost your job and had no savings.

#6 Get your 401k Employer Match. It's free money! Contribute at least enough to get the match, but in reality shoot to contribute even more.

#7 Participate in your ESPP (employee stock purchase plan) Read this article from Wealthfront that explains why this is a no brainer.

#8 Set goals. Having goals makes your day to day financial decisions more meaninful. If you know that you will have X number of dollars saved a year from now if you follow your plan, then blowing your budget one month will have real consequences in your mind.

#9 Pay down student debt. Once you have your emergency fund set and you are getting the max amount of 401k match from your company, the rest of the money should go to paying down your debt as quickly as possible. Prioritize the higher interest loans first.

#10 Establish college funds. If you have kids, there are 529 college savings accounts that can help you prepare for that big future expense. After business school is a good time to start. Check out savingforcollege.com

#11 Set up a FSA/HSA account. You'll have to do some research to see if this is a good fit for you, but it could have some great tax implications.

#12 Talk to a professional. It might be the right time to talk to an accountant, lawyer and maybe even a financial planner.

#13 Get the right insurance. Make sure that you're totally covered and not a risk for a major financial disaster, whether this be with car insurance, life insurance or home owners insurance.

Got a few ideas you'd like to share? Please post them in the comments.