Planning and saving too much?

[Cool Dood]

With the type of stock options you guys are talking about, is there a minimum period before you're allowed to exercise them? I'm just wondering, because it seems like there are countless stories of paper millionaires who lost it all, but could have been more or less fine if they'd had a diversified portfolio. I have no knowledge of the subject, so I'm sure I'm missing something, but I wanted to know...

 

[maddythebeagle]

My original question really centers around whether others out there feel like they plan and save too much at the expense of having fun.

This is a great thread. I cant think of anything that I have missed out on from not spending money. Fine food, expensive cars, huge house, plasma tvs, or even hookers.

 

[free4now]

To answer Cool Dood's question, it's pretty typical for a stock option grant to vest 20% or 25% per year. So you are 4-5 years out before your whole grant is vested (exercisable). Often even if you wanted to sell everything and diversify, you can't because not everything's vested.

One perplexing thing about employee stock options is that when you exercise them you lose the main advantage of those options: Racking up gains on money you haven't actually invested. They grow a lot faster before they are exercised. Once you exercise and convert to cash or actual stock in another index or company, then they just grow at normal market rates.

So diversification has a much higher price than with normal portfolios.

 

[cute fuzzy bunny]

Absolutely. But I sold every year, took the tax hit, reinvested in a diversified portfolio, and retired early.

I was a moron for 7 straight years for doing it when the company stock kept rocketing up. Then when it dropped 80% I became a genius.

Sometimes it pays to be a moron.

 

[audreyh1]

You can also exercise them (i.e. buy the stock at the option price), pay the AMT, and hold on to them for at least a year hoping that the stock will go up and you can pay long-term cap gains on them instead of the much higher tax rates that you'd owe if you did an immediate exercise and sell.

A lot of dot-commers got burned with this transaction.  They exercised and held, paid outrageous AMT, and then when the stock cratered they were left holding the bag with having paid all these taxes yet having a stock that was not worth much.

Pretty brutal.  Dealing with stock options is a risky business.

My company wasn't even public when I first had to exercise my options or lose them. It was kind of "funny money". But thankfully the company did eventually go public - almost a decade later.

Audrey

 

[kaudrey]

There was another thread on a similar topic a few weeks ago, asking if people were having fun while they are still working (or something similar).

My response was "well, I couldn't answer you last week because I was in Costa Rica".

I save about 30% or more of my gross income, and I like to think I am pretty practical, but I do spend money on the things I like to do.

I love to travel, so I do. I usually take 1 big trip and a few smaller trips each year, not including weekend travel to go camping or whitewater rafting or skiing, all of which I like to do as well.

Three years ago I splurged and bought a used 2001 Honda S2000. So I have that in addition to my "practical" car. I love the Honda and don't regret spending the money one bit.

I eat out about once a week, meet friends for drinks on the weekends, and play lots of sports. I spend money on these things, because they make me happy. Luckily for me, I HATE to shop, so I save lots of money that way!

I'm 37 and plan to RE at 52.

 

[Enuff2Eat]

we saved too much also. our style is way lbym but not to the point of depriving.

i was a moron buying real estate but i am no longer a moron, at least for now.

we saved and saved and pleased to know that we reach the millionaire status at the age of 36 but somehow, we're always seems to be insecure about the future.

would like to retire at the age of 50

enuff