Debatable but I agree. His is just a slow way of building wealth but it will get you there nonetheless. Problem is, not a lot of people have the patience to stick to it or in a hurry to get rich so they don't always follow through year after year. The way of building wealth should be catered to one's style but his is generally good for long-term.
D3STINY22 If anything it’s actually easier to follow his slow path to “wealth” than say a FI path. It takes a lot more dedication and hard work to hit wealth under a truncated timeline than it does the “work til I’m 50” method. Additionally, most FI pathways would hardly be considered “getting rich quick”. They still take multiple decades often.
@@kayseacamp It is by no means easy on either way to look at it. Like I said it has to cater to one's style as there is no one way to it. So yes I agree that it does take a lot of hard work as well under a timeline of his/her choosing, wether they want to get rich by 1, 5, 10, 20, or 40 years from now, it is all dependant on their will to learn and capacity to be patient. It is a subjective notion but like i said in the long-term perspective it is a good general guideline to follow. There has to be some kind of baseline for people to follow and lay a foundation generally. Many people have followed it and be successful at it so it is statistically proven to work in the long term. Now if we are in a shorter timeline then our strategy for building wealth would be different than that of Dave's plan but we ultimately want to achieve growth and be financially free. We could use Robert Kiyosaki's approach when it comes to building wealth(again just one example) or a multitude of others that are proven to be successful but it takes discipline. Best practice model if you will. However there are two things that can't change, and that is to trade/invest based on logic and not emotions and there must also always be a plan if something doesn't go well. Risk manage if you will, because more often people count their eggs before they hatch and end up risking a lot more than they could.
My mom has made A LOT off of single stocks but..Dave still has more money so I mean..to me it makes sense to listen to him. Now I know that we don't really know exactly what he does but I come here for his advice and I know he has the numbers to back up having the authority to talk on it..so I listen to him. But I will listen to someone that is a multi multi millionaire over someone who has maybe 4 million.
I am at the beginning of my "investment journey", planning to put 85K into dividend stocks so that I will be making up to 30% per year in dividend returns. Any advice?
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
The issue is people have the "I want to do it myself mentality" but not equipped enough for a crash, hence get burnt. Ideally, advisors are reps for investing jobs, and at first-hand encounter, my portfolio has yielded over 300% since 2020 just after the pandemic to date.
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
Typically, ESPP allow you to buy your company stock at 15% AND typically at either the past 52 week or 26 week low for price. I agree with Dave's thoughts on prioritizing other things first (E.F., debt besides home, saving for retirement, etc.) but he is a little too narrow-minded on this. I am guessing Ramsey employees will never have an ESPP available to them lol.
I actually asked about this at one point. Ramsey's company not publicly traded and nor do they even share stock with senior executives. As far as I can tell, Dave maintains 100% ownership of his company.
I strongly disagree with Dave if the caller wants to turn around and sell the stock. I did this for 2 years, MAX'D out the ESPP, sold at the end of the quarter and earned 15%. The likelihood of a stock losing more than 15% in a quarter is VERY low. Other than capital gains, that's free money - hundreds of dollars in free money every quarter.
If you sell immediately, it’s a guaranteed 15% at minimum before taxes, so I plan to max mine out and sell immediately. Returns will be even higher if the price on the purchase date exceeds the price on the initial offering date and you sell immediately. Ultimately, It’s free money if you sell immediately.
Short-term capital gains taxation on that 15%. A good strategy is buying and holding for at least ayear and one day and wait to sell until it is at least up from your original purchase price.
@@tommymodec You're hoping that after one year the stock price will exceed the original purchase price at some point, which may never occur, so there's obviously some risk in holding the stock. Capital gains tax only applies to gains you have made on the sale of the stock. The government can only tax the gains, so there's still a guaranteed profit from selling immediately. There is no guaranteed profit in your suggestion.
If you read closely I said hold for at least one year and one day to get long-term capital gains taxation. Further, I never said there was no risk - obviously, there is investing capital into ANY company. Lastly, if one is working for a company he or she believes will never be worth as much or more than it is today, I think the bigger issue is finding a new company. I deal with ESPP plans every single week and, similar to investing in even the "safest" of index funds, a level of faith is required to invest. You are right, you just instantly profited with your strategy, but buying and holding stock in one's company that they work hard for and have faith in is not as risky as some make it out to be. Most companies are not Enron haha. Best of luck to you!
@@tommymodec My point was, unless the company ceases to exist, there is no risk when selling your ESPP shares immediately. I was only commenting that your strategy is more risky than mine by the "some risk" comment. I was never implying your strategy has no risk. I am arguing that you should go all in to the ESPP program because you are virtually guaranteed to make profit if you sell immediately on the purchase date as opposed to holding the stock to get it taxed as a long-term capital gain.
@@cw5948 I agree. You get a decent return on your money maybe like 8-10 percent if you sell right away. Also you are paying into it per check so you don't have to have all of the money up front. I treat it as a 6 month savings account that earns way better interest than a real savings account.
I personally do the full 15% of my income into ESPP. But I'm still in alignment with Dave's teaching in that I'm debt-free and have other diverse investments made.
An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company. In the 1980's, I worked for a company that put 30% of gross into the plan without any requirement on the part of the employee. If the company GIVES you free stock, take it. After 4 years, I got laid off. 90% pay and health coverage for a year I got a job in 14 weeks, lost the pay, kept the health insurance for 6 months till new insurance kicked in.
My company also offers an employee stock purchase program, it's not simply a 15% discount. It's a "locked in" price for two years set at whatever the price is when you enroll. Then if the stock goes down that locked in price gets reset and you reenroll at that lower price for two years. This means at the time of your purchase it is at worst a 15% gain on whatever money you put towards it and if the stock goes up it can be substantially more than that. You don't have to hold the stock and could just sell all of your shares as soon as the purchase happens. This return is far better than any of the mutual fund returns Dave talks about. What I'm doing is maxing out my contributions to the ESPP, selling and reinvesting elsewhere. At worst it will be a 15% return on 15% of my income. It's a no brainer if used properly
Go exempt and contribute (gross)and just manage your tax pretty easy but do your own research get more stock that’s if you want to contribute your true 15% yk
Sort of reminds me of my dad's workplace situation. The company he works for pays part or all of his bonuses in stocks (or stock equivalents). He sells the stock as soon as he can even thought the company is a quality blue company because he doesn't want to be over exposed in terms of his investments too heavily weighted in a single company.
I've participated in the stock option at three employers over a decade, the key is to auto sell or manually sell the stocks the first day that you can. Doing this I've never made less than 10%, averaged close to 15% return, and one time doubled my money when the company was purchased by another. Again, the key is to sell immediately and not hold onto the single stock.
@@Phyto_Chemicals Then I would become an investor in a single stock that just also happens to be tied to the success of my employer. If they fall on hard times I lose my job and my stocks become worthless. No thanks. I invest in mutual funds.
But what the caller described is not free money. The company is. It giving him stock. They are giving him a discount on the buying stock. Dave is saying it’s too soon to buy stock that early in the baby steps.
I know someone who had a bunch of stock options in their company and then 2008 happened and his portfolio got cut in HALF. Nothing is guaranteed but just don't be overly confident in anything.
I mean that happened with pretty much everything, even if you were diversified if the entire market crashes your portfolio is going to go down. Most stocks recovered within a few years though. That's why I like having a portion of my money in rental properties, even when the market is down you still have some income to live on so you don't have to sell low.
@@elmateo77 If you had rental properties then you were properly diversified so that is great! People who were like you didn't suffer as bad since there was still other sources of income rolling in. The guy I am talking about was all in and had to come out of retirement to work again because of '08
My biggest financial mistake was investing in my employee stock purchase plan for many years. Company was one of the highest flying companies in the 1990s...well in the late 2000s the stock and company completely tanked. Here it is in 2020 and I am still writing off capital losses on those stock purchases. Thankfully I also invested in a 401K and am fine towards retirement but had I took that ESPP money and invested in a ROTH at the time I would be worth a couple 100K more today. The only way you should invest in a employee stock purchase plan is sell the same day they issue you shares and make a quick 15% - my current employer does espp buys every six months...sell the same day for a quick 15%.
Buy and hold company stock for greater than one year and one day and sell out and pay the long-term capital gains tax and diversify the basis and returns into mutual funds. ESPP are a great thing, but people do not understand strategies around best optimizing them as an employee benefit.
Shares purchased with an ESPP are often subject to a 6-month lockup. The broker won't allow their sale. That lockup applies to every share from the time it's acquired. On top of that, the sale of shares you've held for less than a year is subject to a much higher tax rate.
Both companies where I have worked that had espp allowed for next day sale of the shares. There is no (or very little) capital gains taxes as the shares are generally sold at near the same price as the purchase price. The 15% discount is considered compensation and taxed at your income tax rate (on your W2). Some companies buy/distribute the shares at the 26 or 52 week low for price and in this case you will likely owe capital gains when selling (your income tax rate for short term capital gains)...but whatever as long as you are profiting it is basically free money (except for the fact your money is tied up for typically 0-6 months before the buy).
@@ChicagoTRS Yes, you are paying taxes at your ordinary income tax bracket as opposed to being capped at 15% long-term capital gains, making the amount you pay in taxes significantly higher even if you are in the 22 and 24% federal tax brackets earning a very solid income. Good points made though - they are certainly a more high-level topic in personal finance.
That story about P&G... it's sad what happened to that employee. But, even if it wasn't true, it's a telltale warning for those who put their eggs in one basket! It's good advice from Dave to settle debt and start an emergency fund FIRST!
Erika Kullberg: Lawyer's Finance Tips The only issue I see is putting all eggs in one basket. All I know is I own shares P&G before that happened. Dropped about 50% I think but rebounded and broke even in less than 5 years then up every year from there. It is a dividend achiever stock and paying/increasing dividends for years never stopping during that period. If close to retirement I’m sure she had a pension and social security. Probably retiree medical with that company and had to be getting at least $8k a year P&G dividends because they never stopped paying them and kept increasing. Anyway I seriously can’t complain about owning this stock
Dave offers some good advice on getting out of debt . Investing, not so much . If you have a CSPP, and you sell the stock right after the buy in, that's a guaranteed 15% return on your money . There aren't that many places in this world, where you can get a guaranteed 15% return on your money . You can then allocate that money to things such as your emergency fund or debt . I personally utilize my CSPP as a forced savings .
Correct. This is horribly wrong advice. Its a guarenteed MINIMUM 15%. Its 15% from the lowest price over the period. You can make 20 or 30%. 15% is the floor.
Company match is big, even if the expense ratios are 200 BPS higher in the 401k it would take around 50 years for the non-company match account of the same initial money to surpass it. I thought it wasn't the case, but that initial 100% return from your company really boosts the average yearly rate of return.
If your investments average 8% they'll take around 9 years to double (matching a 100% initial return), not 50 years. Of course a 9 year advantage is still pretty big, but your numbers were a bit off.
Your alternative is picking your own individual stocks, bonds, etc. I think it is fair to assume you and I would miss a lot more than mutual fund managers comprised of Ph.D's and CFAs haha
@@michaelhan4400 ... the S&P 500 can either be bought as a mutual fund or ETF. So, I suppose I did overlook the option of buying an ETF, but it is the same concept structured differently. Haha dude come on with your response.
No major issue with playing a single stock if you really believe in the company and you have the stomach to weather the up's and downs. The name of the game for a more stable investment strategy is diversification so this is what you are going to get with a mutual fund or CFD which tracks an index by investing your money across a wide range or companies and industries.
Not sure that all Employee Stock Option Plans (ESOP) are the same. I recently retired from an employee owned, medium size company, approx 1,700 employees. I was employed in a technical position, well paid but not upper management. I never put a dime of my own money into the ESOP. So far I have cashed out, actually rolled over into my own IRA, approx $500,000. I will continue to cash out a modest amount over the next five years per the ESOP rules. Again, I never put any of my own money into the plan. Note: in addition to the ESOP the company provided generous 401(k) matching, yearly & performance bonuses.
Same where I work. About 18 years ago, they just told us about the ESOP and said hey, we're doing this. At first it wasn't a big deal, but now it's actually worth real money.
I do ESPP. Every 6 months I am allowed to purchase at 15% discount. Then I turn around and sell right away. Yes I pay ordinary income tax, however I still make 10% after taxes. So to me ESPP is a quick way to make 10% on investment. Am I missing something?
Mutual funds are great, and I agree about not overdoing it on the employee stock options. My preference would be to have no more than 10% of my retirement in any single stock, but I'd be perfectly happy to pick 10 diverse companies like: Procter & Gamble, Johnson & Johnson, Chevron, Walmart, Hershey, Coca Cola, United Technologies, Colgate Palmolive, Mcdonalds, and Nike, and put 10% into each and just retire on the dividends after a few decades in an IRA. Each holding will have its up and down years, but in aggregate even if one company suddenly went bankrupt (extremely unlikely with such holdings, but never say never), the growth of the other 9 over the long-term will still match the broader market return, as has been shown in back-tested research. Plus, stocks don't charge annual fees like mutual funds do. Again, mutual funds are still wonderful investments, but you must insist on low cost, as in less than 1% in total fees, and ideally below 0.5%, because 1-2% in fees per year can devastate your overall return over 30-40 years.
I would do it for certain companies. I did ESPP at Chase and it went from $40 to $98. I made good money. My old manager was up over 300k in profits. I don’t do it at my current company though lol
I won $5000 in Vegas once, doesn't make blackjack a good investing strategy. Of course if you can buy at a 15% discount, then immediately sell and put the money in diversified investments then there's nothing wrong with using an ESPP
elmateo77 I agree. It was fine with Chase since it’s the most profitable bank in this country and a major component on the S&P. If the stock tanked at the time then so would the entire market. It wasn’t very risky at all.
Diversification only matters when you’re incurring risk. ESPP is ZERO risk if you sell right away. It’s a guaranteed 15% return. No need to diversify in this case.
Joshua Lutkemuller - holding period are rare in this competitive market, I qualified my recommendation with “if you sell right away”. The right guidance was to seek this information out don’t you think? Typical Ramsey worshipper... it doesn’t change the fact that he gave a terrible uniformed advice based on his flawed assumptions.
Joshua Lutkemuller - thanks for the best wishes. Already a multi-millionaire, working on making it to 8 digits. Had I followed Ramsey I would be debt free sooner but my net worth will have been substantially less. Ramsey uses the same debt elimination principle to build wealth and it doesn’t work well based on 90years of historical data.
Joshua Lutkemuller - most companies these days allow you to sell the day it vests. If you sell right away it’s called non-qualified disposition and even with a 30% tax you’re still seeing a 10% gain for a typical 15% discount. Index fund in IRA (or anywhere) doesn’t pay that well in the same time frame.
Dave is a big fan of property investment, which requires a greater investment in a single zipcode than would be required for a single stock. And you wont get an automatic 15% discount on the property. So I'd have to disagree, and that ESPP is a good idea.
Someone called into Dave's show who had made 10 million (if I remember correctly) in a single stock! I'll try to find the video and correct the number if wrong, but it goes both ways. If ur employer gives u free money of any sorts... TAKE IT! Of course u don't put all ur eggs in one basket.. If you're young, more stocks and fewer bonds are good.... as you get closer to retirement, more bonds and fewer stocks are better. Don't let Dave scare u. He's only running a show, and he needs some controversy to keep the buzz going.
My boss approached me about enrolling in the program. Ive always been hesitant to enroll. It always seemed like it just wasn't what they were making it out to be. Came here for some perspective on the subject. Dave mentioned looking at the 52-wk high and low. Boom, exactly what he said was true. 15%-20% difference between the values. Very interesting point. Again, not saying it is bad, and neither is Dave, but it kind of solidified that it isn't what they make it out to be.
I think there's a time constraint on that and it's what they call a "vesting" period. So they are basically assigned to you today, but after (example) 3 years from now (and not sooner) you can do whatever you want with them. For some companies, if you decide to quit working there within those 3 years then you lose them. But all this stuff varies by company and whatever policy they have implemented.
Technically if there are other investments it is possible to sell the stock short on another investment account. Not recommending to others, just something I did to get money to buy shares with discount.
You can sell immediately. My company makes the stock available 2 times a year, and I sell mine every time. That's only because the money I invest into the employee stock option is seen as my savings, so in effect, I make at least 15% on the money before I move it into my savings account. I am surprised anyone would let that go without participating.
Additionally, if you sell immediately any earnings, including the 15% discount, are taxed as short term gains. Hold the shares for 2 years or longer and you can benefit from long term gains tax rates.
eTrade has a function called a "quick sale" in which if you sign up, they sell your stock immediately and there is zero risk for stock volatility. So you are guaranteed a minimum 15% return.
Good advice, would like to add, especially your employer. You can make an argument your Employment Income/Job is part of your "portfolio". Your job is a bit like a bond tied-in to the company you work for. If, and over the course of a career, the probabilities are not high (but typically underestimated) that your employer at one point collapse, restructures etc ... ESOP could mean that both you current income, and retirement income are tied-in to a single asset/company. I agree with the 10% rule, but mainly because of the discount. Fact is, given a 15% discount - and somewhat of a short vesting period, 10% allocation is reasonable.
Your job/paycheck/cash bonus is your investment in the company you work for. If your company goes under, you lose your job and your entire portfolio. That is putting all your eggs in one basket. The risk is immense. Cash it out when it vests. As for ESPP stocks, take the 15+% win and invest it in a mutual funds or use it to build up a down payment for a house.
Are private companies able to offer employee options much higher than evaluation price? Example. Company A pays out an an annual bonus. It gives the employees the option for cash or equivalent in options with 4 year vesting. Options price of 7.00 a share. Actual evaluation put the stock at 2.25 a share. Employees had no way of knowing what value was.
Hes right espp 15 aint that big of a deal with taxes,broker fees and if you dont file your taxes correctly you will end up back to square 1 and the hold just to get your money
They put rules in about how long you have to hold (before selling)it for 12-36 months. Or someone could endless buy and sell for 15% profit over and over again
@@adiaz1182 Agreed. It is a disqualified disposition if you sell within 2 years of the "look back date" or within 1 year of the purchase date. A disqualified disposition just causes more of the gain to be ordinary income (rather than capital gain). But, again, you can still sell immediately and have zero risk.
Sorry Dave, your take is incorrect. Maxing out your ESPP and selling the day the shares are received is a guaranteed 15%. (- capital gains tax) If your company does lookback, you can only make MORE guaranteed money. Think of it like this, minimum of 15% quarterly bond. You can take the gains and invest in another growth company if you want.
Do the espp . Stay in it for a year or two at the least. But also get in your 401k at the same damn time! Why wouldn’t you take advantage of ESPP. especially when you say the company will be around for awhile
Disagree. Use the ESPP to flip the stock and then fund your Roth IRA at a discount. Or pay your car payment...at a discount. So much lost opportunity in this answer.
Dave is right in terms of going through the steps. Seems like the guy does not have enough cash flow to max out 401k yet. but if the guy has good cash flow and can afford an ESPP payroll deduction, this is literally free money if he sells immediately. a no-brainer. Capital gains tax included, you are looking at >10% ROI. Then take that money and reinvest it in IRA or brokerage.
I do about 1% of my income into my company's ESPP. It accounts for about 1% of my net worth and, in a pinch, I can liquidate it with limited cap gain exposure, something you CANT do with a 401k without penalty AND subjecting the money to ordinary income rates. I would say bad advice by Dave, but it's really just incomplete advice...
@@CaseyMiddlecoff it's a qualified account - you get certain tax benefits by giving up the ability to use the money immediately. To me, the trade off is worth it, but not with 100% of my net worth.
@@brianjames9832 Agreed, the tax benefits are worth giving up access for a period of time, although I wouldn't put all of my money in it since I'd like to be able to spend some of it before I reach retirement age.
I guess when you are a mega millionaire playing it ultra safe is the only way. I am sure Dave took big risks to get to where he is today. The employee stock purchase plan is a guaranteed 15% gain. I'll take what little gains I can.
Dave has stock answers for every question. He doesn’t really address the pros and cons of an ESPP. What about the look back clause? Some of the volatility can be offset.
The company gives employees their lowest quarter price...It's a no-brainer to max out this benefit... liquidation after one year to get capital gains tax break
Dont have to all your eggs in one basket. Mutual funds are an instant way to diversify. For the typical investor, index funds & mutual funds are just the way to go. Unless you have a good financial advisor and you can understand where they are coming from, or you can conduct your own valuations, stay away from single stocks
That doesn't apply here at all. You're not investing in an ESPP to increase your valuation in a single stock; you're doing it to make the 17.5% minimum gain every offering period (typically six months) and then cash out. You're turning down free money if you don't invest in an ESPP at the maximum amount.
This doesn’t take into account that the stock program buys the stock at 15% off at the lowest price in a 6 month period. If you work for a reputable company you can make a decent profit easily. If the company is on its downturn and is at its lowest at the end of the period, you can pull out the day of and still make a small profit
Union Pacific Railroad matches my contribution. I'm not sure what the percentage is, but It's high. Don't you think it would be silly not to invest enough to get the match? To me It's free $$$
Problem was that she was retired and needed money to live on, so she would be liquidating her account when the stock was down. The rebound would be far smaller.
@@itrthho I see how that can be dangerous, however bad example. Im sure she liquidated some of her acc but with a remaining 300,000 she could take what she needs and leave the rest to recover and grow. If she held on to what she could she would have made a killing. INVEST. With your money in good ETF's you have great likelyhood and creating more wealth. Just look at its track record absolute no brainer
Don't buy a single stock? If I had taken this advice I wouldn't have gotten a good return on Amazon, Lulu, and Equinox and many other stocks. I have mutual funds and index funds but I would never not buy single stocks if I think it's a good deal. Like don't make your portfolio only one stock, that's common sense or at least it should be. Also, why in the planet is this man still telling people not to invest until they are debt free? Take this advice if your debt is more than 30 percent of your income and the interest rate are straight out of the wild. But if your income is a lot higher than your debt, invest away. Your income might be your greatest wealth building tool but time is what's really going to make that grow
Agreed, but most of Dave's audience are mouthbreathing children who can't do more than one thing at a time and are incapable of enough math to judge whether a stock is a good deal or not.
What would you say about RSU though. At a major tech company, RSUs make up like 200-300K of the annual income. Should I sell whenever they vest or keep them?
Your job/paycheck/cash bonus is your investment in the company you work for. If your company goes under, you lose your job and your entire portfolio. That is putting all your eggs in one basket. The risk is immense. Cash it out when it vests. As for ESPP stocks, take the 15+% win and invest it in a mutual funds or use it to build up a down payment for a house.
Don't listen to this drivel. If you sell immediately it's guaranteed 15% gain. If your company has a look back feature, like mine does, the gain could be much better. If the stock went from $10 to $20 in the six month period, you get to buy the stock at 15% off the $10 price ($8.50) and sell at $20! That's a no brainer. Ramsey is way too conservative for anyone with a decent income. He doesn't seem to understand leverage or trust YOU to implement that strategy. You can be sure he uses leverage in his portfolio. I think he's spent too much time listening to woefully under capitalized and uneducated people.
So I am trying to find Dave’s opinion on an ESPP that has a company match? We are in steps 4,5&6 and are wondering if it’s a good idea even with a match? Anyone hear such examples?
The caller wasn't asking if it is ok to put ALL his investments in one company, but Dave turned it into that. So, the question was inaccurately answered.
If your company goes bankrupt you loose your job and all your money invested in that company. That’s why I would never invest (a lot) in the company I work for
@Mikhael Alberto Bunda yes even then, I would not invest in the company I work at, if I work at google, and would invest in tech, I would invest in Apple, Microsoft and Tesla, and vice versa. Never bet on 1 horse!
If your reading this take this guys advice to get out of debt. Do not take it to build wealth. The ESPP can be a great opportunity for anybody as long as they make sure they are noticing that the company is making great decisions and have a good track record. If not just sell as soon as they give you the shares as you already have a 15% discount on it!! That’s a no brainer lol
such a BAD advise! He can use the 15% discount, sell the stock right after vesting, and he could be making a great guaranteed return in his investment. David just asked the guy to leave FREE money in the table. Is idealist approch always make him give bad advice like this one.
I disagree. This is one of the best benefits a company offers. If you sell right away, you will make your 15%. But if you keep for long term, it could be risky depending on how your company does.
I believe employee stock options is dumb. “Please use some of your paycheck to invest in the hand paying you for the company to have more money.” I’d rather take the money and invest it as I see fit.
The company is rather giving you the employee, the opportunity to share in their financial success. It's dumb only if you don't believe your company would be financially successful.
@Ivan Salazar I don't participate in my company's ESSP as an investment. I use money that's meant for my savings account to buy the company stock at 15% discount, then sell immediately it's available, then deposit the money into my savings account. At that point, I now decide how to invest it, if needed. In effect, I increased the money by 15% of what it would have been.
@@Uncleamo42 Exactly. Dave does not understand this point, nor do a lot of his viewers. You make a minimum of 15% and there is zero risk if you sell the stock on the same day you purchase it.
Hi Dave Ramsey: Over 40 years, Andrew Yang’s “Freedom Dividend” would give more than one million dollars minus “value added tax” to couples. The Freedom Dividend increases over time. Put the money in our hands! The “bottom 94%” would benefit from a net gain of Freedom Divided minus the “Value Added Tax”. The “top 6%” would benefit from living in a more equitable society. The “top 6%” have family members, friends and colleagues that would benefit from the net gain.
Just remember that companies don't pay taxes. Any tax imposed on a corporation is paid for by the consumer. So it's a tax on consumers. The poor spend disproportionate amounts of their income on consumption. Be careful what you wish for. People like me who make more than they spend will use the dividend to invest and get a piece of those corporate profits. The poor will continue to consume.
@@yamahantx7005 Definitely true that a portion of the price will pass onto the consumer, however we can take a look at most industrialized economies which already have a VAT to see how it plays out. What we can observe is that only a portion of the tax gets passed onto the consumer, as competition keeps prices in check. The VAT hits consumption on all levels, including company expenditures, but is scaled higher for luxury goods and exempted for basic needs like groceries. In order to have a net loss with the VAT, one must consume more than 120k a year. For the bottom 94% of Americans, even with slight increases in price, there is a net gain in buying power. It also consolidates and eliminates our existing welfare programs that incentivize staying in a low income level, meaning there is only more incentive to work as the dividend will never be taken away.
Its a scam, you don't own a single stock, you don't own the company; you own an ACCOUNT with shares of the cash value of the stock that a trust owns. This also means that you have no voting power or little chance of becoming a board member of the company, only ownership is of your ACCOUNT. Basically, you've got nothing but value stored in an ACCOUNT.
ESPP’s are FREE MONEY. He can likely sell all the stock he receives the day after he receives it. And BAM… he just made 15% (or more) on whatever he invested. Most plans allow you to sell immediately. No one should bypass the ESPP.
Dave provides bad advice. Terrible advice. He does not understand. The volatility is not relevant. Participate in the Employee Stock Purchase Plan (ESPP). Put 10% of your salary in the ESPP. Then every 6 months the company will use your 10% withheld and buy the stock at the lower of 15% off the price on the date of purchase or 15% off on the stock price 2 years ago. You always make 15% return on your money or more if the stock goes up. Always. Then you can do a "quick sale" (that is eTrade's term) to sell the stock on the exact same day. So the volatility is not relevant if you sell the same day you buy the stock.
boy this is some dumb advice. Participate in the plan and sell the stock when you get the vest. That is 15% (minimum) return in 6 mo. Then drop the cash into a mutual fund.
Agreed. By the way Dave explains it, he does not understand. You get 15% off the lower of the stock price today or 2 years ago. Not 15% off the higher.
You all know you can sell the stocks at an immediate 15% profit no matter the stock price right? There’s no risk as long as you do that, and don’t hold.. Love Dave but he clearly doesn’t get how it works or he doesn’t want to overcomplicate the baby steps for the listeners
Dave’s view on investments is exactly where I leave his camp. His camp is amazing for getting out of debt but not for building wealth.
Exactly
Debatable but I agree. His is just a slow way of building wealth but it will get you there nonetheless. Problem is, not a lot of people have the patience to stick to it or in a hurry to get rich so they don't always follow through year after year. The way of building wealth should be catered to one's style but his is generally good for long-term.
D3STINY22 If anything it’s actually easier to follow his slow path to “wealth” than say a FI path. It takes a lot more dedication and hard work to hit wealth under a truncated timeline than it does the “work til I’m 50” method. Additionally, most FI pathways would hardly be considered “getting rich quick”. They still take multiple decades often.
@@kayseacamp It is by no means easy on either way to look at it. Like I said it has to cater to one's style as there is no one way to it. So yes I agree that it does take a lot of hard work as well under a timeline of his/her choosing, wether they want to get rich by 1, 5, 10, 20, or 40 years from now, it is all dependant on their will to learn and capacity to be patient. It is a subjective notion but like i said in the long-term perspective it is a good general guideline to follow. There has to be some kind of baseline for people to follow and lay a foundation generally. Many people have followed it and be successful at it so it is statistically proven to work in the long term.
Now if we are in a shorter timeline then our strategy for building wealth would be different than that of Dave's plan but we ultimately want to achieve growth and be financially free. We could use Robert Kiyosaki's approach when it comes to building wealth(again just one example) or a multitude of others that are proven to be successful but it takes discipline. Best practice model if you will.
However there are two things that can't change, and that is to trade/invest based on logic and not emotions and there must also always be a plan if something doesn't go well. Risk manage if you will, because more often people count their eggs before they hatch and end up risking a lot more than they could.
My mom has made A LOT off of single stocks but..Dave still has more money so I mean..to me it makes sense to listen to him. Now I know that we don't really know exactly what he does but I come here for his advice and I know he has the numbers to back up having the authority to talk on it..so I listen to him. But I will listen to someone that is a multi multi millionaire over someone who has maybe 4 million.
I am at the beginning of my "investment journey", planning to put 85K into dividend stocks so that I will be making up to 30% per year in dividend returns. Any advice?
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
The issue is people have the "I want to do it myself mentality" but not equipped enough for a crash, hence get burnt. Ideally, advisors are reps for investing jobs, and at first-hand encounter, my portfolio has yielded over 300% since 2020 just after the pandemic to date.
Glad to have stumbled on this comment, Please who is the consultant that assist you and if you don't mind, how do I get in touch with them?
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
Typically, ESPP allow you to buy your company stock at 15% AND typically at either the past 52 week or 26 week low for price. I agree with Dave's thoughts on prioritizing other things first (E.F., debt besides home, saving for retirement, etc.) but he is a little too narrow-minded on this. I am guessing Ramsey employees will never have an ESPP available to them lol.
Yeah, it's a great deal if you then sell the stock and move to more diversified investments.
I actually asked about this at one point. Ramsey's company not publicly traded and nor do they even share stock with senior executives. As far as I can tell, Dave maintains 100% ownership of his company.
I strongly disagree with Dave if the caller wants to turn around and sell the stock. I did this for 2 years, MAX'D out the ESPP, sold at the end of the quarter and earned 15%. The likelihood of a stock losing more than 15% in a quarter is VERY low. Other than capital gains, that's free money - hundreds of dollars in free money every quarter.
Why sell at the end of the quarter? Sell it right away, on the day the option is executed. You are guaranteed to have 15% free money.
@@sxanep In our case the buy and options only went on your account quarterly. Agreed, as soon as possible.
Exactly. ESPP is a deal I'll take all day every day.
It’s free and some company has 2 years lowest price
If you sell immediately, it’s a guaranteed 15% at minimum before taxes, so I plan to max mine out and sell immediately. Returns will be even higher if the price on the purchase date exceeds the price on the initial offering date and you sell immediately. Ultimately, It’s free money if you sell immediately.
Short-term capital gains taxation on that 15%. A good strategy is buying and holding for at least ayear and one day and wait to sell until it is at least up from your original purchase price.
@@tommymodec You're hoping that after one year the stock price will exceed the original purchase price at some point, which may never occur, so there's obviously some risk in holding the stock. Capital gains tax only applies to gains you have made on the sale of the stock. The government can only tax the gains, so there's still a guaranteed profit from selling immediately. There is no guaranteed profit in your suggestion.
If you read closely I said hold for at least one year and one day to get long-term capital gains taxation. Further, I never said there was no risk - obviously, there is investing capital into ANY company. Lastly, if one is working for a company he or she believes will never be worth as much or more than it is today, I think the bigger issue is finding a new company. I deal with ESPP plans every single week and, similar to investing in even the "safest" of index funds, a level of faith is required to invest. You are right, you just instantly profited with your strategy, but buying and holding stock in one's company that they work hard for and have faith in is not as risky as some make it out to be. Most companies are not Enron haha. Best of luck to you!
@@tommymodec My point was, unless the company ceases to exist, there is no risk when selling your ESPP shares immediately. I was only commenting that your strategy is more risky than mine by the "some risk" comment. I was never implying your strategy has no risk. I am arguing that you should go all in to the ESPP program because you are virtually guaranteed to make profit if you sell immediately on the purchase date as opposed to holding the stock to get it taxed as a long-term capital gain.
@@cw5948 I agree. You get a decent return on your money maybe like 8-10 percent if you sell right away. Also you are paying into it per check so you don't have to have all of the money up front. I treat it as a 6 month savings account that earns way better interest than a real savings account.
I personally do the full 15% of my income into ESPP. But I'm still in alignment with Dave's teaching in that I'm debt-free and have other diverse investments made.
An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company.
In the 1980's, I worked for a company that put 30% of gross into the plan without any requirement on the part of the employee.
If the company GIVES you free stock, take it.
After 4 years, I got laid off.
90% pay and health coverage for a year
I got a job in 14 weeks, lost the pay, kept the health insurance for 6 months till new insurance kicked in.
My company also offers an employee stock purchase program, it's not simply a 15% discount. It's a "locked in" price for two years set at whatever the price is when you enroll. Then if the stock goes down that locked in price gets reset and you reenroll at that lower price for two years. This means at the time of your purchase it is at worst a 15% gain on whatever money you put towards it and if the stock goes up it can be substantially more than that. You don't have to hold the stock and could just sell all of your shares as soon as the purchase happens. This return is far better than any of the mutual fund returns Dave talks about.
What I'm doing is maxing out my contributions to the ESPP, selling and reinvesting elsewhere. At worst it will be a 15% return on 15% of my income. It's a no brainer if used properly
Go exempt and contribute (gross)and just manage your tax pretty easy but do your own research get more stock that’s if you want to contribute your true 15% yk
Sort of reminds me of my dad's workplace situation. The company he works for pays part or all of his bonuses in stocks (or stock equivalents). He sells the stock as soon as he can even thought the company is a quality blue company because he doesn't want to be over exposed in terms of his investments too heavily weighted in a single company.
Ecclesiastes 11:2 New International Version (NIV)
2 Invest in seven ventures, yes, in eight;
you do not know what disaster may come upon the land.
I've participated in the stock option at three employers over a decade, the key is to auto sell or manually sell the stocks the first day that you can. Doing this I've never made less than 10%, averaged close to 15% return, and one time doubled my money when the company was purchased by another. Again, the key is to sell immediately and not hold onto the single stock.
@@Phyto_Chemicals Then I would become an investor in a single stock that just also happens to be tied to the success of my employer. If they fall on hard times I lose my job and my stocks become worthless. No thanks. I invest in mutual funds.
I work for Publix that offers great stock plans for employees. But i agree with Dave. I need to get out of debt first.
Fuzzy Pink Bunny it an abbreviation for department dumb dumb
@@faraanqureshi7183 Jokes on you....the OP was trying to say debt and misspelled. Wipe the drool off your chin.
@@chartuck I love it when dumb jokes via text go over peoples heads, you have joined the ranks of the dumb dumbs
Idk ahah well my pops has 3000 shares at Costco . Costco at $300 a share now .
$800 now
Wow
Dave, should I take free money? ...Is your house paid off? ... No. ...Then, of course not! Pay off your house first!
But what the caller described is not free money. The company is. It giving him stock. They are giving him a discount on the buying stock. Dave is saying it’s too soon to buy stock that early in the baby steps.
I'm love participated into my retiring.
Much agree, retiring great monies!
I know someone who had a bunch of stock options in their company and then 2008 happened and his portfolio got cut in HALF. Nothing is guaranteed but just don't be overly confident in anything.
I mean that happened with pretty much everything, even if you were diversified if the entire market crashes your portfolio is going to go down. Most stocks recovered within a few years though. That's why I like having a portion of my money in rental properties, even when the market is down you still have some income to live on so you don't have to sell low.
@@elmateo77 If you had rental properties then you were properly diversified so that is great! People who were like you didn't suffer as bad since there was still other sources of income rolling in. The guy I am talking about was all in and had to come out of retirement to work again because of '08
My biggest financial mistake was investing in my employee stock purchase plan for many years. Company was one of the highest flying companies in the 1990s...well in the late 2000s the stock and company completely tanked. Here it is in 2020 and I am still writing off capital losses on those stock purchases. Thankfully I also invested in a 401K and am fine towards retirement but had I took that ESPP money and invested in a ROTH at the time I would be worth a couple 100K more today. The only way you should invest in a employee stock purchase plan is sell the same day they issue you shares and make a quick 15% - my current employer does espp buys every six months...sell the same day for a quick 15%.
You may not be able to do that. There could be stipulations that prevent it.
Buy and hold company stock for greater than one year and one day and sell out and pay the long-term capital gains tax and diversify the basis and returns into mutual funds. ESPP are a great thing, but people do not understand strategies around best optimizing them as an employee benefit.
Shares purchased with an ESPP are often subject to a 6-month lockup. The broker won't allow their sale. That lockup applies to every share from the time it's acquired. On top of that, the sale of shares you've held for less than a year is subject to a much higher tax rate.
Both companies where I have worked that had espp allowed for next day sale of the shares. There is no (or very little) capital gains taxes as the shares are generally sold at near the same price as the purchase price. The 15% discount is considered compensation and taxed at your income tax rate (on your W2).
Some companies buy/distribute the shares at the 26 or 52 week low for price and in this case you will likely owe capital gains when selling (your income tax rate for short term capital gains)...but whatever as long as you are profiting it is basically free money (except for the fact your money is tied up for typically 0-6 months before the buy).
@@ChicagoTRS Yes, you are paying taxes at your ordinary income tax bracket as opposed to being capped at 15% long-term capital gains, making the amount you pay in taxes significantly higher even if you are in the 22 and 24% federal tax brackets earning a very solid income. Good points made though - they are certainly a more high-level topic in personal finance.
That story about P&G... it's sad what happened to that employee. But, even if it wasn't true, it's a telltale warning for those who put their eggs in one basket! It's good advice from Dave to settle debt and start an emergency fund FIRST!
Erika Kullberg: Lawyer's Finance Tips
The only issue I see is putting all eggs in one basket.
All I know is I own shares P&G before that happened.
Dropped about 50% I think but rebounded and broke even in less than 5 years then up every year from there.
It is a dividend achiever stock and paying/increasing dividends for years never stopping during that period.
If close to retirement I’m sure she had a pension and social security. Probably retiree medical with that company and had to be getting at least $8k a year P&G dividends because they never stopped paying them and kept increasing.
Anyway I seriously can’t complain about owning this stock
Erika Kullberg: Lawyer's Finance Tips unless that basket is filled with Tesla 😁
BlackWorldTraveler I really enjoyed reading your response. Some excellent points you made!
Charles 😄
@@Xx0GsaburzxX Tesla stock is currently valued at over 85x its annual earnings. At this point it's more likely to go down than up.
Dave offers some good advice on getting out of debt . Investing, not so much . If you have a CSPP, and you sell the stock right after the buy in, that's a guaranteed 15% return on your money . There aren't that many places in this world, where you can get a guaranteed 15% return on your money . You can then allocate that money to things such as your emergency fund or debt . I personally utilize my CSPP as a forced savings .
I agree
I agree too
You are correct.
Correct. This is horribly wrong advice. Its a guarenteed MINIMUM 15%. Its 15% from the lowest price over the period. You can make 20 or 30%. 15% is the floor.
A 15% discount is actually over a 17% return on investment if you sell right away.
Company match is big, even if the expense ratios are 200 BPS higher in the 401k it would take around 50 years for the non-company match account of the same initial money to surpass it. I thought it wasn't the case, but that initial 100% return from your company really boosts the average yearly rate of return.
If your investments average 8% they'll take around 9 years to double (matching a 100% initial return), not 50 years. Of course a 9 year advantage is still pretty big, but your numbers were a bit off.
"Is Participate In My Employee Stock Option A Bad Idea?" - Great title!
Dave only hires the best!
Don't forget to make fun of degrees in underwater German basket-weaving.
It's also in the description, it's that good.
@@bingerz237 wow! I guess money is more important than accuracy!
@@panpluto13 Yep, only if you can afford it. Lol
I don’t like mutual funds most of managers miss.
Your alternative is picking your own individual stocks, bonds, etc. I think it is fair to assume you and I would miss a lot more than mutual fund managers comprised of Ph.D's and CFAs haha
@@tommymodec Wrong. His alternative could be choosing low cost index funds that track the market like the S&P500.
@@michaelhan4400 ... the S&P 500 can either be bought as a mutual fund or ETF. So, I suppose I did overlook the option of buying an ETF, but it is the same concept structured differently. Haha dude come on with your response.
Look at what happened to the steel companies, foundations of the economy and stable of stable. Between 1979 and 1990. They went down 80 to 100%
And like GM....
? thats two companies. my dads company in shipyard industry sold for 500m
No major issue with playing a single stock if you really believe in the company and you have the stomach to weather the up's and downs. The name of the game for a more stable investment strategy is diversification so this is what you are going to get with a mutual fund or CFD which tracks an index by investing your money across a wide range or companies and industries.
Not sure that all Employee Stock Option Plans (ESOP) are the same. I recently retired from an employee owned, medium size company, approx 1,700 employees. I was employed in a technical position, well paid but not upper management. I never put a dime of my own money into the ESOP. So far I have cashed out, actually rolled over into my own IRA, approx $500,000.
I will continue to cash out a modest amount over the next five years per the ESOP rules. Again, I never put any of my own money into the plan. Note: in addition to the ESOP the company provided generous 401(k) matching, yearly & performance bonuses.
Same where I work. About 18 years ago, they just told us about the ESOP and said hey, we're doing this. At first it wasn't a big deal, but now it's actually worth real money.
i have been witj an ESOP company for 5 year. amd they basically give you money for free for investing
@Fuzzy Pink Bunny Shhh Dave has more money than you, that makes his opinions about everything automatically right. (or so he says)
ESOP and ESPP are two different animals.
I would participating in beans and rice, rice and beans.
Sell the employee stock option so fast your IRA will think it's next
@@TheKnightBlade4 this literally made me lol. Underrated comment haha
I do ESPP. Every 6 months I am allowed to purchase at 15% discount. Then I turn around and sell right away. Yes I pay ordinary income tax, however I still make 10% after taxes. So to me ESPP is a quick way to make 10% on investment. Am I missing something?
Nope, as long as you sell immediately you're fine. Just don't let all your money sit in one stock for long.
When did Dave start working at Best Buy?
😂
Mutual funds are great, and I agree about not overdoing it on the employee stock options. My preference would be to have no more than 10% of my retirement in any single stock, but I'd be perfectly happy to pick 10 diverse companies like: Procter & Gamble, Johnson & Johnson, Chevron, Walmart, Hershey, Coca Cola, United Technologies, Colgate Palmolive, Mcdonalds, and Nike, and put 10% into each and just retire on the dividends after a few decades in an IRA. Each holding will have its up and down years, but in aggregate even if one company suddenly went bankrupt (extremely unlikely with such holdings, but never say never), the growth of the other 9 over the long-term will still match the broader market return, as has been shown in back-tested research. Plus, stocks don't charge annual fees like mutual funds do. Again, mutual funds are still wonderful investments, but you must insist on low cost, as in less than 1% in total fees, and ideally below 0.5%, because 1-2% in fees per year can devastate your overall return over 30-40 years.
I would do it for certain companies. I did ESPP at Chase and it went from $40 to $98. I made good money. My old manager was up over 300k in profits. I don’t do it at my current company though lol
I won $5000 in Vegas once, doesn't make blackjack a good investing strategy. Of course if you can buy at a 15% discount, then immediately sell and put the money in diversified investments then there's nothing wrong with using an ESPP
elmateo77 I agree. It was fine with Chase since it’s the most profitable bank in this country and a major component on the S&P. If the stock tanked at the time then so would the entire market. It wasn’t very risky at all.
Very well explained. Diversification is key.
I personally own Procter & Gamble in my individual stock portfolio..
but it's only a fraction of the pie.
Diversification only matters when you’re incurring risk. ESPP is ZERO risk if you sell right away. It’s a guaranteed 15% return. No need to diversify in this case.
@@Omikoshi78 not sure I'm understanding your comment..
Joshua Lutkemuller - holding period are rare in this competitive market, I qualified my recommendation with “if you sell right away”. The right guidance was to seek this information out don’t you think? Typical Ramsey worshipper... it doesn’t change the fact that he gave a terrible uniformed advice based on his flawed assumptions.
Joshua Lutkemuller - thanks for the best wishes. Already a multi-millionaire, working on making it to 8 digits. Had I followed Ramsey I would be debt free sooner but my net worth will have been substantially less. Ramsey uses the same debt elimination principle to build wealth and it doesn’t work well based on 90years of historical data.
Joshua Lutkemuller - most companies these days allow you to sell the day it vests. If you sell right away it’s called non-qualified disposition and even with a 30% tax you’re still seeing a 10% gain for a typical 15% discount. Index fund in IRA (or anywhere) doesn’t pay that well in the same time frame.
Is title writing in the Engrish?
I agreeing with this statements.
Health is the ultimate Wealth!!
Wealth is the ultimate health
Dave is a big fan of property investment, which requires a greater investment in a single zipcode than would be required for a single stock. And you wont get an automatic 15% discount on the property. So I'd have to disagree, and that ESPP is a good idea.
Someone called into Dave's show who had made 10 million (if I remember correctly) in a single stock! I'll try to find the video and correct the number if wrong, but it goes both ways.
If ur employer gives u free money of any sorts... TAKE IT! Of course u don't put all ur eggs in one basket.. If you're young, more stocks and fewer bonds are good.... as you get closer to retirement, more bonds and fewer stocks are better. Don't let Dave scare u. He's only running a show, and he needs some controversy to keep the buzz going.
No doubt single stocks have higher upside or downside.
Procter & Gamble stock is at an all time high
As a P&G share holder since the 1980's it was a long, long ride up, time wise, from the bottom.
What hes talking about happened in January 2000
My boss approached me about enrolling in the program. Ive always been hesitant to enroll. It always seemed like it just wasn't what they were making it out to be.
Came here for some perspective on the subject. Dave mentioned looking at the 52-wk high and low. Boom, exactly what he said was true. 15%-20% difference between the values. Very interesting point.
Again, not saying it is bad, and neither is Dave, but it kind of solidified that it isn't what they make it out to be.
I would recommend not participate
Don't you just sell immediately and take the 15% gain? Your risk exposure it 3 days or so between buy and when you can sell (usually).
I think there's a time constraint on that and it's what they call a "vesting" period. So they are basically assigned to you today, but after (example) 3 years from now (and not sooner) you can do whatever you want with them. For some companies, if you decide to quit working there within those 3 years then you lose them. But all this stuff varies by company and whatever policy they have implemented.
Technically if there are other investments it is possible to sell the stock short on another investment account. Not recommending to others, just something I did to get money to buy shares with discount.
You can sell immediately. My company makes the stock available 2 times a year, and I sell mine every time. That's only because the money I invest into the employee stock option is seen as my savings, so in effect, I make at least 15% on the money before I move it into my savings account. I am surprised anyone would let that go without participating.
Additionally, if you sell immediately any earnings, including the 15% discount, are taxed as short term gains. Hold the shares for 2 years or longer and you can benefit from long term gains tax rates.
eTrade has a function called a "quick sale" in which if you sign up, they sell your stock immediately and there is zero risk for stock volatility. So you are guaranteed a minimum 15% return.
Good advice, would like to add, especially your employer. You can make an argument your Employment Income/Job is part of your "portfolio". Your job is a bit like a bond tied-in to the company you work for. If, and over the course of a career, the probabilities are not high (but typically underestimated) that your employer at one point collapse, restructures etc ... ESOP could mean that both you current income, and retirement income are tied-in to a single asset/company. I agree with the 10% rule, but mainly because of the discount. Fact is, given a 15% discount - and somewhat of a short vesting period, 10% allocation is reasonable.
Apart from the misspelled title, i really liked the advice!
Sultan’s Financial Journey I was wondering why it hasn’t been corrected yet 😭
Your job/paycheck/cash bonus is your investment in the company you work for. If your company goes under, you lose your job and your entire portfolio. That is putting all your eggs in one basket. The risk is immense. Cash it out when it vests. As for ESPP stocks, take the 15+% win and invest it in a mutual funds or use it to build up a down payment for a house.
Are private companies able to offer employee options much higher than evaluation price? Example. Company A pays out an an annual bonus. It gives the employees the option for cash or equivalent in options with 4 year vesting. Options price of 7.00 a share. Actual evaluation put the stock at 2.25 a share. Employees had no way of knowing what value was.
Hes right espp 15 aint that big of a deal with taxes,broker fees and if you dont file your taxes correctly you will end up back to square 1 and the hold just to get your money
I do it but I sell it immediately
+15% on your money immediately? Sounds very good.
They put rules in about how long you have to hold (before selling)it for 12-36 months. Or someone could endless buy and sell for 15% profit over and over again
@@onesixteen210 Every plan I have read you can sell it immediately, so there is no risk.. But I agree to check before you participate.
Eman the rule is you get taxed for capital gain
@@adiaz1182 Agreed. It is a disqualified disposition if you sell within 2 years of the "look back date" or within 1 year of the purchase date. A disqualified disposition just causes more of the gain to be ordinary income (rather than capital gain). But, again, you can still sell immediately and have zero risk.
ESPP plans are not the same, some only pay a discount of 10%.
Sorry Dave, your take is incorrect. Maxing out your ESPP and selling the day the shares are received is a guaranteed 15%. (- capital gains tax) If your company does lookback, you can only make MORE guaranteed money. Think of it like this, minimum of 15% quarterly bond. You can take the gains and invest in another growth company if you want.
Do the espp . Stay in it for a year or two at the least. But also get in your 401k at the same damn time! Why wouldn’t you take advantage of ESPP. especially when you say the company will be around for awhile
Disagree. Use the ESPP to flip the stock and then fund your Roth IRA at a discount. Or pay your car payment...at a discount. So much lost opportunity in this answer.
You only lose your money of sold. I bet since then PnP has 100x. He should mention that part as well
If it's free stock you might as well get the match and go index funds with the rest you are investing.
Dave is right in terms of going through the steps. Seems like the guy does not have enough cash flow to max out 401k yet. but if the guy has good cash flow and can afford an ESPP payroll deduction, this is literally free money if he sells immediately. a no-brainer. Capital gains tax included, you are looking at >10% ROI. Then take that money and reinvest it in IRA or brokerage.
it's risky to put ur money in an ESOP because if they go bankrupt not only are you out of a job but your stock and pension will be worthless too.
I do about 1% of my income into my company's ESPP. It accounts for about 1% of my net worth and, in a pinch, I can liquidate it with limited cap gain exposure, something you CANT do with a 401k without penalty AND subjecting the money to ordinary income rates. I would say bad advice by Dave, but it's really just incomplete advice...
Brian James I’ve always felt a 401K is a bit scammy since you never have full control over your money.
Do you feel that way as well?
@@CaseyMiddlecoff it's a qualified account - you get certain tax benefits by giving up the ability to use the money immediately. To me, the trade off is worth it, but not with 100% of my net worth.
@@brianjames9832 Agreed, the tax benefits are worth giving up access for a period of time, although I wouldn't put all of my money in it since I'd like to be able to spend some of it before I reach retirement age.
You don’t pay into Esop, your company pays 💯. We have ESOP where I work. He must be talking about 401k or something.
I guess when you are a mega millionaire playing it ultra safe is the only way. I am sure Dave took big risks to get to where he is today. The employee stock purchase plan is a guaranteed 15% gain. I'll take what little gains I can.
Dave has stock answers for every question. He doesn’t really address the pros and cons of an ESPP. What about the look back clause? Some of the volatility can be offset.
Dave doesn't mention if the plan buys at the lowest point of the quarter. Would that change his anwer?
Depends on the stock and overall percentage of your investment portfolio.
Porter & Gamble, did the stock pay a dividend? I would have fine with the loss provided that the stock paid a dividend.
The company gives employees their lowest quarter price...It's a no-brainer to max out this benefit... liquidation after one year to get capital gains tax break
By this logic, you shouldnt open a company. Because it might fail
Dont have to all your eggs in one basket. Mutual funds are an instant way to diversify. For the typical investor, index funds & mutual funds are just the way to go. Unless you have a good financial advisor and you can understand where they are coming from, or you can conduct your own valuations, stay away from single stocks
That doesn't apply here at all. You're not investing in an ESPP to increase your valuation in a single stock; you're doing it to make the 17.5% minimum gain every offering period (typically six months) and then cash out. You're turning down free money if you don't invest in an ESPP at the maximum amount.
This doesn’t take into account that the stock program buys the stock at 15% off at the lowest price in a 6 month period. If you work for a reputable company you can make a decent profit easily. If the company is on its downturn and is at its lowest at the end of the period, you can pull out the day of and still make a small profit
Union Pacific Railroad matches my contribution. I'm not sure what the percentage is, but It's high. Don't you think it would be silly not to invest enough to get the match? To me It's free $$$
Can u just take the stocks then sell it at market price a few months later?
when has P&G taken over a 60% hit? regardless shes probably tripled that 750,000 by now. You should not be scared to invest your money
Problem was that she was retired and needed money to live on, so she would be liquidating her account when the stock was down. The rebound would be far smaller.
@@itrthho I see how that can be dangerous, however bad example. Im sure she liquidated some of her acc but with a remaining 300,000 she could take what she needs and leave the rest to recover and grow. If she held on to what she could she would have made a killing. INVEST. With your money in good ETF's you have great likelyhood and creating more wealth. Just look at its track record absolute no brainer
Don't buy a single stock? If I had taken this advice I wouldn't have gotten a good return on Amazon, Lulu, and Equinox and many other stocks. I have mutual funds and index funds but I would never not buy single stocks if I think it's a good deal. Like don't make your portfolio only one stock, that's common sense or at least it should be. Also, why in the planet is this man still telling people not to invest until they are debt free? Take this advice if your debt is more than 30 percent of your income and the interest rate are straight out of the wild. But if your income is a lot higher than your debt, invest away. Your income might be your greatest wealth building tool but time is what's really going to make that grow
Agreed, but most of Dave's audience are mouthbreathing children who can't do more than one thing at a time and are incapable of enough math to judge whether a stock is a good deal or not.
What about ESPP’s with a leading cannabis company?
My company's 4% 401k match is in ESOP (No % discount).
One word. ENRON! Everyone said that was a very strong company that couldn't go away...right up until the day it collapsed!
What would you say about RSU though. At a major tech company, RSUs make up like 200-300K of the annual income. Should I sell whenever they vest or keep them?
Your job/paycheck/cash bonus is your investment in the company you work for. If your company goes under, you lose your job and your entire portfolio. That is putting all your eggs in one basket. The risk is immense. Cash it out when it vests. As for ESPP stocks, take the 15+% win and invest it in a mutual funds or use it to build up a down payment for a house.
Should I saving money?
Never. Spend all you monies on BitConnect!
Don't listen to this drivel. If you sell immediately it's guaranteed 15% gain. If your company has a look back feature, like mine does, the gain could be much better. If the stock went from $10 to $20 in the six month period, you get to buy the stock at 15% off the $10 price ($8.50) and sell at $20! That's a no brainer. Ramsey is way too conservative for anyone with a decent income. He doesn't seem to understand leverage or trust YOU to implement that strategy. You can be sure he uses leverage in his portfolio. I think he's spent too much time listening to woefully under capitalized and uneducated people.
So I am trying to find Dave’s opinion on an ESPP that has a company match? We are in steps 4,5&6 and are wondering if it’s a good idea even with a match? Anyone hear such examples?
I wish mine was still 15% off. That stopped like 6 years ago and is only 10% now
The caller wasn't asking if it is ok to put ALL his investments in one company, but Dave turned it into that. So, the question was inaccurately answered.
Is much strange video title?
Dave says that a 15% return is not great??
If your company goes bankrupt you loose your job and all your money invested in that company. That’s why I would never invest (a lot) in the company I work for
@Mikhael Alberto Bunda yes even then, I would not invest in the company I work at, if I work at google, and would invest in tech, I would invest in Apple, Microsoft and Tesla, and vice versa. Never bet on 1 horse!
@@Marks_Piano I will never work somewhere I wouldn't invest in, facts. I put $500 in a year. I am blessed to use ESPP.
@@tevonhennesy6110 I didn't say that, I said "all your money" would you put all your eggs in one basket? Better not break the basket!
@@Marks_Piano 😂😂😂
If your reading this take this guys advice to get out of debt. Do not take it to build wealth. The ESPP can be a great opportunity for anybody as long as they make sure they are noticing that the company is making great decisions and have a good track record. If not just sell as soon as they give you the shares as you already have a 15% discount on it!! That’s a no brainer lol
such a BAD advise! He can use the 15% discount, sell the stock right after vesting, and he could be making a great guaranteed return in his investment. David just asked the guy to leave FREE money in the table. Is idealist approch always make him give bad advice like this one.
I disagree. This is one of the best benefits a company offers. If you sell right away, you will make your 15%. But if you keep for long term, it could be risky depending on how your company does.
The company I work for requires holding purchases for two years before selling.
I believe employee stock options is dumb. “Please use some of your paycheck to invest in the hand paying you for the company to have more money.” I’d rather take the money and invest it as I see fit.
The company is rather giving you the employee, the opportunity to share in their financial success. It's dumb only if you don't believe your company would be financially successful.
im in an ESOP and the company doesnt take any of my money. they just give me a percentage of their profits. its a bemefit for working in the company
@Ivan Salazar I don't participate in my company's ESSP as an investment. I use money that's meant for my savings account to buy the company stock at 15% discount, then sell immediately it's available, then deposit the money into my savings account. At that point, I now decide how to invest it, if needed. In effect, I increased the money by 15% of what it would have been.
@@manuelbuenrrostro5131 that's different from an ESPP. The free stock option is mostly available at startups to attract talent.
@@Uncleamo42 Exactly. Dave does not understand this point, nor do a lot of his viewers. You make a minimum of 15% and there is zero risk if you sell the stock on the same day you purchase it.
My company match is in it's own stock. So I need to sell that ?
Sell it periodically to reduce risk and keep your trading costs low
Yeah, take the match then sell the stock and invest diversely to reduce risk.
Hi Dave Ramsey: Over 40 years, Andrew Yang’s “Freedom Dividend” would give more than one million dollars minus “value added tax” to couples. The Freedom Dividend increases over time. Put the money in our hands!
The “bottom 94%” would benefit from a net gain of Freedom Divided minus the “Value Added Tax”. The “top 6%” would benefit from living in a more equitable society. The “top 6%” have family members, friends and colleagues that would benefit from the net gain.
Just remember that companies don't pay taxes. Any tax imposed on a corporation is paid for by the consumer. So it's a tax on consumers.
The poor spend disproportionate amounts of their income on consumption.
Be careful what you wish for. People like me who make more than they spend will use the dividend to invest and get a piece of those corporate profits. The poor will continue to consume.
@@yamahantx7005 Definitely true that a portion of the price will pass onto the consumer, however we can take a look at most industrialized economies which already have a VAT to see how it plays out. What we can observe is that only a portion of the tax gets passed onto the consumer, as competition keeps prices in check. The VAT hits consumption on all levels, including company expenditures, but is scaled higher for luxury goods and exempted for basic needs like groceries. In order to have a net loss with the VAT, one must consume more than 120k a year. For the bottom 94% of Americans, even with slight increases in price, there is a net gain in buying power. It also consolidates and eliminates our existing welfare programs that incentivize staying in a low income level, meaning there is only more incentive to work as the dividend will never be taken away.
Its a scam, you don't own a single stock, you don't own the company; you own an ACCOUNT with shares of the cash value of the stock that a trust owns. This also means that you have no voting power or little chance of becoming a board member of the company, only ownership is of your ACCOUNT. Basically, you've got nothing but value stored in an ACCOUNT.
open a brokerage account and BUY TSLA
how much is p&g worth now though?
Enough that if the lady he was talking about didn't sell it when it was low she's a multi-millionaire now...
what about 50% off
Is Dave a licensed financial advisor?
International mutual fund? The world economy is collapsing, the only thing that will survive is the US. Do completely domestic.
Dumb advice. You can’t lose money on an espp if you sell right away
ESPP’s are FREE MONEY. He can likely sell all the stock he receives the day after he receives it. And BAM… he just made 15% (or more) on whatever he invested. Most plans allow you to sell immediately. No one should bypass the ESPP.
Dave provides bad advice. Terrible advice. He does not understand. The volatility is not relevant. Participate in the Employee Stock Purchase Plan (ESPP). Put 10% of your salary in the ESPP. Then every 6 months the company will use your 10% withheld and buy the stock at the lower of 15% off the price on the date of purchase or 15% off on the stock price 2 years ago. You always make 15% return on your money or more if the stock goes up. Always. Then you can do a "quick sale" (that is eTrade's term) to sell the stock on the exact same day. So the volatility is not relevant if you sell the same day you buy the stock.
*participation
Is comment title good idea?
😂
boy this is some dumb advice. Participate in the plan and sell the stock when you get the vest. That is 15% (minimum) return in 6 mo. Then drop the cash into a mutual fund.
Agreed. By the way Dave explains it, he does not understand. You get 15% off the lower of the stock price today or 2 years ago. Not 15% off the higher.
You all know you can sell the stocks at an immediate 15% profit no matter the stock price right? There’s no risk as long as you do that, and don’t hold..
Love Dave but he clearly doesn’t get how it works or he doesn’t want to overcomplicate the baby steps for the listeners
What if you work for Tesla right now? 😜
Tesla is probably going to move that 15%.. same rule Dave mentions still applies.