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My Company’s Stock Purchase Plan, Take 3

by Flexo on November 14, 2006

in Career and Work, Investing

Recently, I’ve written about my company’s new stock purchase plan. My employer is giving all employees a chance to purchase up to 10% of their salary in company stock at a 15% discount of the lower of the beginning or end of each quarter. Yesterday, I made my election official. I will be contributing the maximum.

This is going to cause a shortfall in my cash flow. It will be significant since I my income is already being distributed to my 401(k), Roth IRA, savings, and necessary expenses. I believe the best way to handle this is to use savings to supplement my income which will be “missed,” and replace that savings at the end of each quarter (or during the open trading windows) when I sell the company stock.

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Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • Good choice. It's nice that your plan is set up quarterly -- that cuts way back on how long you'll need to subsidize your income from savings.

    The only problem I have with these programs is that they do complicate your taxes somewhat.
  • My former employer offered the same great 15% deal and I have no regrets about participating in the program (stock is up almost 600%). In fact, I wish I had purchased the maximum of 10% for the entire time I worked there!

    There is some different tax handling involved due to the 15% discount, but I don't recall all of the details. That is probably why the two year holding period was suggested to you...
  • Definitely a good choice, especially if the stock prices is likely to go up. But instead of leaning on your savings I would see if I could cut back on my spending in the interim.
  • Boatman
    ESPP's are wicked to reconcile at tax time if you've sold any.
  • Cujo
    I hear you - but don't let that stop you from doing the ESPP. Bear in mind that the annual return on this is far more than 15% - for example, the witholding from the last paycheck of the period makes 15% in two weeks!

    Just don't be greedy - if you don't sell immediately at the end of the period, this turns from a sure thing into a gamble. If you were going to buy stock in your company anyway, then go ahead, but don't let the discount sucker you into buying and holding stock you otherwise wouldn't.
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