“Nic, curious, where do you typically see people leak wealth?”
This comes up a few times a year and the implied answer is usually “lifestyle creep?”
But it’s employer stock.
Here’s what usually happens:
· Equity vests
· Taxes get withheld automatically
· The remaining shares land in your brokerage account
And then time goes on, nothing happens.
Here’s a good example from two different clients: Both families came to us, similar age, similar incomes, similar equity compensation, they were both in completely different financial positions.
The difference was literally because one of them received guidance along the way and was intentional around their concentrated stock.
When a large portion of your net worth sits in the same company that pays your salary, you’re stacking risk in one place. If the company does well, it feels brilliant. If it struggles, it not only can affect your income, but it also whacks your portfolio.
Doing nothing feels safe (and easy) in the short term, but doing nothing is a decision.
I’m not saying every share should be sold immediately. That’s too simplistic. Sometimes there are tax considerations, sometimes there are strategic reasons to hold. But there should be a plan.
- What percentage of your net worth is tied to one company?
- What’s the exit strategy?
- What happens if the stock lost 50%?
- Examples over past 20 years: United Parcel Service, General Electric, Ford
- What happens if it doubles?
- Examples over past 20: Apple, Nvidia, Netflix
Those aren’t fear-based questions. They’re clarity-based questions.
Real financial confidence doesn’t come from hoping your company keeps winning. It comes from knowing your family’s future isn’t dependent on one outcome.
If you have equity compensation, it deserves more than autopilot.
If you or someone you’re close to could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help.
— Nic
Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizons before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
