Hey /r/personalfinance!
So, lately I discovered myself in a really constructive, however tough, monetary state of affairs that I’m making an attempt to unravel. For some background, I’m very fortunate as I’m an early worker at a excessive progress startup that’s at present providing a young provide to staff on any share of their vested shares. For these unfamiliar with a young provide, this basically implies that they’re keen to buy our vested shares on the present worth of the inventory (proper now, every inventory is about $20 which is predicated on the valuation of the corporate).
Being an early worker, I’ve been issued a big allotment of inventory, ~23k, at my begin date, with a $0 strike/train value, on a 4 yr vesting schedule. So, I get a 1/4 of my whole shares annually. I simply reached my 2 yr mark, which means I’ve about 11k shares vested, and in a position to promote as much as 11k. Additionally, for the reason that price to train was 0 {dollars}, I exercised my shares 2 years in the past.
The corporate is giving us the chance to promote these vested shares, which means that at most, I can promote them and obtain $216,000 pre-tax. I don’t assume I can go 100% flawed with any method I resolve to promote as a result of I nonetheless have a big allotment of unvested shares remaining, and I don’t see myself leaving the corporate anytime quickly (knock on wooden).
Right here is the tough half. I’m sadly in a number of pupil debt, ~$132k being in non-public loans (Rate of interest of 5.799%). It’s a lengthy story as to how I ended up in that state of affairs, however sadly I’m in it, and the consensus on this discussion board/normally is to get out of it as quickly as doable. I’ve fortunately been in a position to pay the quantity wanted for every invoice as I’ve a powerful wage ($172,000).
My query is, does it make sense to promote the right quantity of my at present vested shares by way of the tender provide to fully repay the non-public pupil debt? I might solely must pay unusual earnings tax, as a result of I technically personal the inventory, and as a result of phrases of the tender provide, I don’t must pay capital positive aspects. Right here is the breakdown if I had been to promote the mandatory quantity for the mortgage:
Inventory = ~9.7k Inventory / 23k (~40% of all shares)
Gross Acquire = $194,310.51
Price of train/brokerage = $0
Estimated Abnormal Revenue Tax Withholding = $61,946
Web Liquidity = $132,364
Complete Mortgage = $132,434 (Rate of interest of 5.799%)
Out of pocket remaining price = $70
The cons that I see are that:1. I basically am locking in myself for two extra years to get the remainder of my shares (assuming the corporate continues to do nicely, and I don’t hate my job, which I don’t lol)2. Doubtlessly decreasing the higher sure on how a lot I could make from the shares all through the period of the corporate. I imagine the corporate will at minimal 5x its valuation the following spherical primarily based on how now we have been doing
I feel I’m fortunate on this state of affairs as a result of I really feel comfy with spending the allotment I’ve as a result of quantity of inventory I’ve remaining for vesting. The chance right here appears to be doubtlessly the distinction between being very rich vs very very rich/not rich in any respect (if in some way the corporate tanks, as soon as once more, knock on wooden). Nevertheless, I’ve the chance for monetary freedom right here, and I don’t know if I might really feel okay simply leaving this chance. I might love some perception from this group to see if my pondering is correct right here, and if not, why.
For some further context on my monetary state of affairs if wanted, I’ve an emergency fund constructed for 3 months of bills, together with about $40k in my 401k, and make $170,000 a yr.
Thanks all for the assistance!
