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Savings Chart w/ ESPP
(lemmy.world)
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this post was submitted on 02 Jan 2025
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I think it's much harder to add something like an ESPP to this kind of generic flowchart. There are too many ways to vary it, not to mention it's a single investment in a single company. It would be hard to specify even a single category of stock to invest in that would apply to anyone at any time, let alone a single company. If you ask me about an ESPP for 10 different companies, I'd have 10 different answers.
Something like a 401k is fairly similar everywhere. You can't recommend specific funds but nearly all 401k's will have roughly the same options available and the vesting and matching options follow one of a handful of schemes so you can safely make a recommendation there without the specifics having a large impact on the outcome.
Ultimately, an ESPP is a taxable account and you would apply it there (at the end), if anywhere. Like any other individual stock, it should be considered as part of your overall portfolio. For example, if you work at a large cap tech firm, you may want to account for the additional risk you're taking on by reducing your large cap investment and expanding other categories (note, this is not a perfect balance and is by no means a recommendation).
If you choose to manually build a portfolio (as opposed to a three- or four-fund portfolio) or you work with an active manager, you or your manager can fine tune it better.
And that really depends on the terms of the ESPP. If it's a big enough discount, you could prioritize it over some other parts earlier in the flowchart.
The flowchart shouldn't try to account for every scenario, it should be a starting point for most people. I honestly think it's too complicated and prefer things like the Money Guy's Financial Order of Operations (FOO), because that focuses on principles instead of following a flowchart. Here it is in text, with some personal notes (image below):
Even here with a simplified priority system, the ESPP could go in 2 (if it has a low max), 5 or 6 (if the discount is good enough), or 7, or even none of the above if the holding time is longer that you feel comfortable with. It really depends on the company, terms, and your personal risk tolerance. You can go above 25% of income toward retirement, but they actively discourage it because that could put you into miser territory, and recommend giving if you don't have anything useful to spend excess on.