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How the Employee Stock Purchase Plan Works

Are you anxious to build a stock portfolio that’s bigger than your shoe collection?

Well, of course, you need to subscribe to Wealthy Women Daily to get your weekly investing tips. But you also can take advantage of the benefits associated with working for a company that allows you to participate in the Employee Stock Purchase Program (ESPP).

Now, I wish I knew the ins and outs of the Employee Stock Purchase Plan (ESPP) when I first entered corporate America. But I didn’t. I missed out on tons of money and I don’t want you to do the same.

What is the ESPP?

This employer-sponsored program may allow employees to buy shares of stock at a discounted price! So, instead of paying the market price of $150/share, you may only have to pay $135/share. How cool is that?!

How does the ESPP work?

Every time you get paid, deductions are taken out of your paycheck to go towards the employee stock purchase program. The company typically doesn’t buy your shares immediately. The shares are bought in bulk at one point in time. That purchase can take place every 3 months, 6 months, or at the end of the year. Find out more about your company’s offering and purchase period.

When can you sell your shares?

You can hit the sell button anytime you want! You just need to be aware of capital gains taxes if you profit from this transaction. Find out the pros and cons associated with selling your shares now versus selling your shares a year later. You can talk to your CPA to understand how it all works.

How much should you invest in your company ESPP?

Well, how much does it cost to be you every month and can you allocate more money towards the ESPP? If you’re working at a top company and you see the potential for future growth, it may be a good idea to contribute as much as you are allowed.

Why invest in the ESPP?

People are in love with the ESPP because you get to profit from the company’s growth. What a great incentive to continue working hard for the company!

It’s an attractive offer when someone tells you that you can purchase shares of stock at a price lower than the market price. So, if your company stock is selling on the stock exchange for $100 and you get a 15% discount, you only have to pay $85.

The Employee Stock Purchase Plan should not be your end all be all solution to investing. That’s too much exposure in one area. Diversify. Take advantage of the shares you can buy at a discounted rate from participating in the ESPP but also look for other ways to create a well-balanced portfolio.

Ready to build your portfolio and improve your financial resume? Let’s talk! 1:1 financial coaching sessions are available. Just send me an email at for more information.

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About Charlene Rhinehart, CPA

Charlene Rhinehart is a Certified Public Accountant, Founder of Wealthy Women Daily, and Editor-in-Chief of the Dividend InvestHer and The Wealthy Woman Investor. Charlene is currently the Chair of the Illinois CPA Society Taxation Individual Committee. With over a decade of experience in the financial services industry, Charlene is one of the few leaders who design insights specifically for the woman investor. Charlene’s work has been featured in a variety of publications including the Huffington Post, Black Enterprise, and the American Institute of Certified Public Accountants. In 2019, Charlene released her book “Dividends Are a Queen’s Best Friend”, on Amazon.

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