So... Financial advice question.
I currently contribute 10% of my income to the company ESPP. There are a lot of benefits to it, such as a 5% discount with an [up to] 2 year lookback price. So if the stock appreciates relative to my lookback price, I can make a significant instant profit on a buy. I've traditionally used it as forced savings to have a SHTF fund. By keeping the money out of my hands it ends up only being used when needed, while if I'd just tried to put it in savings (or leave it in my checking) I know I would've spent it.
Well, going forward I have enough to cover a SHTF situation, so I don't really *need* to keep contributing. After my next purchase late 2026 which will be the last on the current lookback period, I don't expect another 10x+ movement in the stock from here (although I'd love it lol). So some of the upside might not be there for the instant profit on the stock going forward.
Next summer I want to buy a house. That'll coincide with another kid leaving the nest (and a commensurate reduction in child support). But houses here are expensive... No matter what, I can't afford a mortgage w/o including that 10%.
I'm planning to at least ride the 10% into the next purchase period that ends late spring 2027. But from there I'm considering dropping it to 1% so that I can actually contribute that 9% to mortgage payments. With that, I'm still in the program so if the stock price becomes advantageous vs lookback I can always ramp it back to 10%, but the 9% ends up in my bank account every month instead of only having it lump sum into ETrade every 6 months when we have a stock buy.
The alternative is to keep contributing 10%, live cash flow negative on a monthly basis, and sell stock as needed to make up the difference. That way I continue to have all potential upside of the ESPP program and just might accumulate more $$ over time. And if there's an unexpected stock price move I'm already at 10%, since I can only ramp up percentage every 6 months for the next offering period, not within a specific offering period.
Thoughts? What would you do?
My $0.02.....literally worth exactly that.
Your ESPP has already accomplished its original goal. In my high-yield savings account, I use a spreadsheet to split out categories, and have sinking funds for various things that can or might blindside us. Those are effectively my SHTF categories. One thing I've had to teach myself to do is to quit contributing to those when I know the reasonably estimated target goals have been hit (cue questions about how can you know what SHTF stuff is coming.....I'd say "I just do," but really, I've found most things can be forecasted and planned for). Things have "hit us" which didn't really hit us, and when appropriate, I resume building back up that portion of the account.
So the way I see it: Option A--1) contribute 10%, 2) the mortgage is effectively too expensive, 3) every month you're short, 4) you sell ESPP shares periodically as needed, 5) technically, your net worth might grow slightly faster. What I don't like is, practically, you're constantly selling investments to pay bills, timing may matter, it potentially makes your taxes more of a hassle, and every unexpected expense requires another sale. You said you don't expect another 10x movement.
Option B--1) contribute 1%, 2) mortgage is affordable from paychecks, 3) no monthly deficit, 4) you remain enrolled in ESPP, 5) you can increase contributions later if circumstances change.
I'm going with Option B. There's value in simplicity, and I wouldn't want to buy a house knowing that my monthly budget works because I plan to liquidate investments every so often. (I'll note that's different from selling stock for a down payment. No problems for me there.)
You can make an argument for looking at the discount value you've actually realized for the last X years and looking at the average gain from the lookback (presumably ignoring the big run you don't expect again). If you expect that extra 9% contributed to ESPP to net you, say, 6-7%.....I mean....maybe? If it were something in the realm of 20%....that's a different thing.
Not knowing specifics to think through any particular projections.......I'm sticking with Option B.
That said, you should probably do A. Fading every decision I make is probably the best way to get ahead.
