Employee Stock Purchasing Plan

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?

10 responses to “Employee Stock Purchasing Plan

  1. I’ve never had an ESPP since I’ve never worked for a place that offered one. I’ve always heard that if you do take part of a ESPP, make sure that your investments overall are still diversified enough. I wouldn’t go to the max right away. How about starting low and increasing your contribution by 1% every year?

    • I don’t want to be that conservative because I want to take advantage of my company matching shares. The sooner i start, the sooner those shares will mature and the company will match ’em. Unfortunately, we are facing some income constraints since my hubby is not working/earning enough. If he could double his pay a month, then we could contribute the 5%. If he can’t I might have to be conservative for now until November when I can increase the contribution.

  2. If you get a deal with your ESPP that is on the higher one I would say put in as much as you can. Heck, you could re-sell them the next day and make a killing.

      • I know. I mean after three years I get matched shares, which is 100% investment. My company is growing, hopefully it won’t go bankrupt anytime soon! Plus shares are relatively affordable right now. The economy’s slumps are making it a great chance to buy.

      • I would say that’s a pretty good return. You could always look at your companies Financial Statements to see what is going to happen over the next year or so. If they are a public company I could give you a hand.

      • That’s awesome! I think a lot of people will appreciate it. I think it’s also important to follow the companies and look at their strategies, as well as how the industry as a whole is doing.

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