I remember I had a very smart admin (she latter left Intel to study computer science at Stanford!) who wasn't taking advantage of the employee stock purchase plan. I understood her problem (single mom living in an expensive area on a admin salary) but still I was determined for her to take advantage of this deal. I told her it being better to borrow the money on the credit card deal. I eventually I said easiest way for her to double her raise was to sign up. Eventually she did and she did thank me.
I just have to comment on this little side-topic. It's one of my favorite "opportunity knocks" stories.
I suspect that your ESPP was structured very much (if not exactly) like ours was. I know of at least one mega-corp with this plan in place, and ours seemed to be a carbon copy of it (why re-invent the wheel?). When I first saw the plan, I kept looking for the "gotcha", the "fine print". I couldn't believe it, it was all gravy, it was a "gift", there was no "gotcha". IIRC, it went something like this:
A) Sign up for 6 months at a time. You took a payroll deduction for the amount you invest up to 10% of your gross.
B) At the end of 6 months, you get the company stock at 15% below the lowest of EITHER the price at the beginning or the end of the period. That was the part I had to read 27x to believe.
C) You could sell the stock as soon as it was credited to your account ( a matter of days).
Wow. The only risk I could scratch out of this was - if the stock dropped more than 15% from your purchase price between the few days from closing to the time you could sell. One could short that much stock, or buy a put to protect themselves, but I assumed that any delta would average out, so I just accepted that small risk. I ALWAYS sold immediately when it hit my account.
The math: A 15% purchase discount means you sell at 17.6% above your purchase price ($100 stock purchased at $85 is 100/85 = 17.6% gain). 17.6% done 2x a year is 38.4% MINIMUM compounded annual return, practically guaranteed! Often, the stock rose over the period, so you took the gain on top of that! I'd have to dig it up, bit it was thousands, usually many thousands of dollars of pure profit each year, at very, very low risk. THAT felt good!
So yes, if you could not handle a 10% reduction in your paycheck, you could put that on your CC and keep paying it down with the profits. You would never suffer a cash flow reduction, and you would be out of debt and enjoying the profits in a short while.
I kept talking this up with my co-workers, and I was shocked at how hesitant people were. "I can't afford it", with no more thought; "I already own too much company stock" (you are going to sell it within days!); lethargy; suspicion. I got to the point where I was begging people to do it, I told them I would put up the money, and they can keep half the profit. I would have loved to get dozens of people to do this, the profits would have poured in ( I def would have bought/sold puts for a few days with that much exposure). But I really would say it to make the point of what a great deal this was. Yet, so many people passed it by.
It really was not "investing" - it was a company benefit. I told people, you don't voluntarily give up a raise, or your health insurance, do you? So why give this up? But people did.
One of my employees followed my lead, but it took a lot for him to convince his conservative wife. He started out with a small deduction, but went up to the full 10% the next period. He thanked me, and still emails me occasionally for financial feedback
When opportunity knocks, do you listen?
-ERD50
. Beats the heck out of the 24 year old with 100K in student loans, that Grandma's house is pledged as collateral.
