Hey, everybody. David Barson with Barson Financial Planning. One of the best parts of living in the Bay Area is you often have access to stock compensation. That could be restricted stock units, non-qualified stock options, or incentive stock options or other types of stock compensation. But sadly, what I find often is people don't know exactly how much they own in these various accounts and so one of the things I do is I help them figure out how much they have and strategize around those particular shares.
The first thing I'll do is I'll inventory what do they have as far as grants? How many shares are granted to them? And then when do those shares actually become theirs? Once I can determine that, I can see how those shares impact the rest of the financial plan. Maybe I'll look at the investments and see, okay, you're getting these shares, what percentage do these shares make up of your overall portfolio? Are you going to be concentrated in this? Are you taking too much risk by being exposed in this one particular position? Or is this one position maybe lopsiding the portfolio, giving you exposure to one particular sector in too great of a portion? Maybe it's healthcare or technology, depending on the stock that you're getting. So we always want to be managing the risk and making sure we have the proper investment strategy and the proper diversification strategy.
Next, we'll look at the taxes. When are you recognizing this income? And each of these types of shares has different rules so any time there's different rules, there are different opportunities to strategize around taxes. So, I might work with clients' own CPA or I might refer them to a CPA and work with them to help them strategize and make sure that they are optimizing their tax strategy.
Last, often you get these shares in a given month and usually, your expenses for that month don't outweigh the income that you have coming in from these shares. Therefore, we have extra money. What do we do with that? Well, we have an opportunity to fund long-term goals. Maybe that's paying for kids' college, maybe that's paying off debt, could be buying a home potentially or putting money aside for a home, a car, or just funding retirement.
So a lot of different options there and what we'll do is work with clients to help them fund those goals or start to work towards those goals. So I do have a stock compensation checklist. If you're interested, at the bottom of this video you'll see a link and you can click on that and just let me know if you’d like to get that. I'm happy to provide it to you.
Also, this is not specific information to sell or to buy a particular security. If you do have questions about your specific situation, talk to your certified financial planner or your tax advisor before taking any action in your own portfolio.
Thanks a lot, take care.
David Barson, MBA, CFP® is a financial planner and founder of Barson Financial Planning, a Fee-Only Registered Investment Advisor based in San Mateo, California. Barson Financial Planning offers comprehensive financial planning and investment management services specializing in working with those approaching or in retirement and professionals in biotechnology.
Disclaimer
Barson Financial Planning, LLC is a Registered Investment Advisor offering advisory services in the state of CA and in other jurisdictions where exempted. The information contained herein is not intended to be used as a guide to investing or tax advice. This material presented is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Past performance is no guarantee of future results
