Newsletter: I Should Have Done Something About it Sooner

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This Week at a Glance

• I should have done something about it sooner. Don’t let this be you when your company’s stock value declines and you need the money. This week I’m covering three steps you can take now to ensure you have a handle on your stock options, RSUs and stock held in your 401k ESOP.
• Stocks bounced back this week but are trading choppy as earnings and rate uncertainty weigh on sentiment. While stocks have notched a string of gains in recent days, the rally lost some steam on Wednesday as the Fed’s Kashkari signaled that rates are likely to stay at historic highs for a while.
• How will you be remembered in 100 years? Will anyone remember who you are? And if they do, will it be how you want them to remember you? Because if you don’t write your story, others will write it for you. That’s why last week I discussed three ways you can write your own story.

I Should Have Done Something About it Sooner

I should have done something about it sooner.

Have you ever taken a big bet and experienced a big loss?

Now, I’m not talking about going all-in on a Blackjack bet at the casino.

No, what I’m talking about is pouring your heart and soul into a professional role with the hope of a big payday.

It’s the anticipation of giving your all to something bigger than yourself only to see it come to nothing.

Now, if you have, then you likely know that sinking feeling that you should have hedged your bets sooner.

Maybe you shouldn’t have poured everything into that one big bet because you just watched it, and all your financial hopes and your life plans fade away with it.

But maybe you’ve been lucky.

Maybe you’ve made all the right moves and happened to be in just the right place at just the right time.

And so, you’ve likely found that one opportunity that moved you from one successful role to the next.

But, here’s the thing: if you’re like most of us, you’ll likely one day come to know the Law of Unintended Consequences.

You’ll likely learn firsthand what it means to experience a Black Swan event.

Or maybe, the universe will give you a quick lesson in Murphy’s Law.

And in that moment, you’ll truly experience the sinking feeling that maybe you shouldn’t have put all of your eggs in one basket, that maybe you should have done something about it sooner.

Now, this point is especially true if your employer pays you with stock options, RSUs, or company stock paid into your retirement savings account.

Because here’s the thing: Not having a plan for your concentrated stock holding, no matter how hard you’ve worked or how lucky you’ve been, could eventually set you up for disappointment.

How to Avoid Regret with Your Company Stock

Therefore, unless you have a plan for the stock you receive from your employer, whether that’s a stock award or match in your 401k, you’ll likely want to consider diversifying your concentrated holdings sooner rather than later.

Because if you don’t, you could face unexpected financial costs, undue stress and anxiety, and a deeper challenge to your life and financial goals.

Here’s what you can do to avoid this outcome:

Step #1: Determine Your Timing Need

The first vital step in managing your concentrated holdings is understanding the timing of your savings needs.

This timing allows you to strategically decide whether to hold, sell, or diversify your stock based on your financial needs and goals.

Ask yourself: “What specific needs will my company stock fund, and when will I need the money?”

Then, write down your financial goals in order of need.

This will provide a roadmap for what to do next and help avoid regret when it comes to your company stock.

Step #2: Understand Your Vesting Schedule

A vesting schedule determines when you will fully own the stock awarded.

By mastering this schedule, you can better plan when these assets will be available and how to utilize them to meet your goals.

Ask yourself: “What are the key dates on my vesting schedule and how will they impact my financial plans?

Make a list of all vesting milestones related to your stock awards and retirement benefits.

Regularly revisiting this schedule will keep you prepared to make timely decisions.

Step #3: Align Your Selling Strategy

A selling strategy involves deciding the timing and quantity of stock sales based on your life goals regardless of market conditions.

This approach enables you to spread risk across various assets and hedge the risk of a single company’s stock.

Ask yourself: “What is my ideal asset allocation, and how should my selling strategy adapt to meet this?

Begin outlining a detailed selling plan. Specify which portions of stock you might sell over time to align with your financial goals and risk tolerance.

I talk more about this approach in this week’s article >>>

What I’m Reading

We’re all busy in the daily rush of things. That’s why I’m sharing a list of articles that I’ve read this week to help you stay on top of your own financial independence journey.

I’ve consolidated all of these links here for your ease of viewing.

• Love Your Company Stock? Here’s What to Know.
• Having Too Much Employer Stock in Your 401(k) is Dangerous. Just Look at GE.
• Workers with Company Stock Might Have Too Much risk in Their Investment Portfolio
• Asset Allocation and Diversification
• Concentrated vs. Diversified Portfolios

Thanks for taking a look!