Here comes another edition of the grown up world! Fresh off the press!!! On Monday, I talked about the Exciting and Not So Exciting Parts of Growing Up. Wednesday, I wrote about retirement contributions. And today, I am writing about my employee stock purchasing plan. Honestly, until I joined my company I had no idea I could do this. Sure, I have heard of Facebook and Google employees becoming overnight millionaires after IPOs. I had also heard a graduate classmate who works at AT&T as an IT Engineer, talk about buying company stocks. But when I asked him about it, he was pretty much clueless about it. So no luck there! Of course, I also remember Enron employees losing their retirement savings because they were banking on continual company success.
If you are wondering what an Employee Stock Purchasing Plan is; a quick Google search generated these results:
A company-run program in which participating employees can purchase company shares at a discounted price. Employees contribute to the plan through payroll deductions, which build up between the offering date and the purchase date. At the purchase date, the company uses the accumulated funds to shares in the company on behalf of the participating employees. The amount of the discount depends on the specific plan but can be as much as 15% lower than the market price. -Investopedia.com
Trying to figure out how much to contribute in my ESPP is giving me a headache. I can contribute 1%-7.5% of my base gross salary. If you hold the stock for three years, my company will match each share with one share. I have 90 days from my start date to enroll, and the next time I can change my contribution is November.
The matching is awesome! In three years, I will be able to sell those stocks and hopefully make a profit! Three years is a long time to wait, but I am all about long term goals.
Dang..three years from now I will be 25….suspense music please?
Why am I having so much trouble? Well, I have no idea how much I want to contribute! 1%? 2%? 3%? 4%? 5%? I don’t want to contribute the max right now because we want to increase our cash savings, plus I am already contributing to my 401K. I am really tempted to contribute 5%, and then if I feel comfortable increase my contribution in November. But I also have to balance my savings…dilemma…dilemma
Do you have an ESPP? Do you contribute to it? How does it work? Has it paid off? What has been your return?