Financial Planning for Important Life Decisions
Shannon is a human resources professional who loves living in the East Bay and her company has just gone public. She still says she works for a tech “start-up”, even though they’ve grown significantly in the last ten years and have hundreds of employees now! Along with a good income, she now has significant stock in her company and wants to make sure her investments are diversified and aligned with her values. She doesn’t know whether she should sell her stock options now that her company has gone public or whether she should keep holding the stock since it has done so well.
Context: How New Wealth Will Change My Current Life?
She and her partner, Charlie, enjoy traveling but don’t know how they may want to shift their life with this new stock wealth. Shannon wants to create more time for enjoying life outside of work, but she isn’t sure if she’d prefer to arrange a sabbatical with her current company or diligently save with the goal of retiring early.
Opportunity: Ace the Basics, and Make a Plan
In addition to their investment questions, Shannon and Charlie know they should make a trust to protect this new wealth, but admit they haven’t gotten to it after years of being on the to-do list. To further complicate their thinking, Charlie will likely inherit money in the next few years, and they aren’t sure how to integrate their finances in a savvy, and safe, way.
The North Berkeley Approach: Understand the Trade-Offs
Shannon and Charlie needed the perspective of how all the moving financial pieces fit together – stock options, taxes, career choices. The work with North Berkeley focused on understanding the trade-offs between different strategies and emphasizing there is no ‘one right path’ but rather choices that they were now empowered to make. Shannon found comfort in the diversification plan once she understood the tax impact and the benefits, and not having all her financial eggs in one basket. Charlie was reassured that a good trust could protect their assets, including future inheritance, in a way that honored their goals for giving to both family and charity. The trust, and having a plan, also relieved stress they had about traveling more.
The North Berkeley Solution: Diversify, then Envision (and Protect) the Future
After our first year of work together, they:
- Diversified half of Shannon’s company stock, with plans to continue this path in the coming years.
- Analyzed tax implications of the stock sales, and escrowed funds to pay the tax bill next April.
- Donated specific shares of stock to a Donor Advised Fund that gave them a current-year tax benefit.
- Modeled the question of sabbatical versus early retirement to help their thinking about what shifts to make in their life.
- Introduced to a creative, local estate planning attorney that helped them create a joint trust, that met their shared and individual goals.
Results: Peace of Mind and Tax Savings
Having made the above changes, Shannon and Charlie saw the following results:
- Less stress about having their whole financial life tied to one company
- Enhanced ability to give charitably, and get tax benefit along the way
- Framework for thinking about a sabbatical from work, even if they’ve decided not to do it yet.
Having a clear roadmap allowed them to take action in the short term and resulted in a more grounded understanding of how different options would impact their financial security.
Lessons Learned: Career Shifts Can Be Challenging, But Also Exciting
Working for a fast-paced or start-up company can be exciting, but everything has a lifecycle. Changes in the company (getting larger, new ownership, going public) or in your own life (health shifts, having children, desire to travel) can lead to decisions about when to sell stock, or even decide to leave the company. This change can be scary. Along with the uncertainty comes opportunity – to do things you weren’t able to while working in that environment, to take a class or travel, to slow down and spend more time with family.
There is usually a technical component and ways to optimize financial decisions, but these need to be balanced with the more personal or emotional considerations. Often too many options create paralysis, but with a bit of help and understanding the trade-offs, a path forward emerges that feels good. A weight is lifted when we’re able to move forward into the next chapter with a clear plan.