Your ESPP work benefit can help you reach financial independence!
No matter what stage you are at in your life, taking steps to build wealth will ensure that one day you won’t have to work to pay for the things you need and want. Instead, you will use your savings and investments to generate a “paycheck” to help you cover all your expenses. The good news is…the more savings and investments you have, the bigger the “paycheck” you can generate.
If your employer offers an Employee Stock Purchase Plan (ESPP) this benefit can be used to help you grow your nest egg. An ESPP gives you the opportunity to purchase company stock at a discount, which means you will have a built-in profit…free money! A typical discount is 15%, but each plan is different so you will need to understand the details and rules of your employer’s plan. Check out this list of some basic things to think about before you dive in:
- Are you eligible?
- Check your eligibility and find out the timing of the open enrollment period.
- Do you need your whole paycheck to live on?
- Your stock plan purchases get funded by automatic payroll deductions from your paycheck, so you need to be able to afford to put some of your paycheck towards company stock purchases.
- How much of your salary should you put in?
- You will need to decide how much you can or want to contribute to the ESPP, there are limits. We’ve seen limits of $25,000, but again, this depends on your employer’s plan.
- What is your exit strategy?
- Once you are participating in the stock purchase plan you need to have a strategy for when to sell your shares of the company stock and pay taxes.
Taking advantage of this employee benefit along with other regular saving and investing can help you become financially independent, then you can have a work optional lifestyle! If you are looking for a coach to guide you through building your wealth, lets connect and work on a plan to achieve your goals.
