As the New Year begins, many make resolutions to improve their health, relationships, or careers. But what about our financial goals? Financial goals are important, too. If you have equity compensation, setting clear resolutions (or, better yet, goals) for the year ahead can be just as impactful. While making decisions around your equity compensation might feel complex (even daunting), doing so is still essential for maximizing your opportunity, managing your potential tax obligations, and maintaining control over your financial well-being.

Below, we highlight a few equity comp priorities when setting resolutions for the year ahead. 

Review and Understand Your Equity Compensation Grants

When an employer wants to incentivize its employees or new hires with equity compensation, it can grant equity in stock options, units, or shares. Each has the potential to earn significant value over time, but it’s important to understand the timeline and tax treatment of your grants.

First, your equity comp will likely not be made available immediately when it’s granted. Instead, you’ll be given a vesting schedule. During the vesting period, you are unable to touch your equity comp. Once the shares, units, or stock have vested, however, you may be able to make decisions like exercising or selling.

It’s important to know your vesting schedule, as some types of equity compensation may trigger taxes when they vest, like restricted stock units (RSUs). Others won’t be taxed until you take specific actions, like exercising your options.

Another reason to understand your vesting schedule? You want your equity compensation to fit into your financial life, not vice versa. Keeping track of when your equity will become available (and the tax ramifications nvolved) can help you better align your options or shares with your broader financial picture. 

Navigate Tax Implications of Equity Compensation

As mentioned above, taxes are one of the most pressing concerns regarding equity compensation. When left unaddressed, they can erode your equity’s value and create surprise (and often sizable) tax bills.

In some cases, equity comp may be taxed as ordinary income when vested, while in other instances, you may need to pay tax on the capital gains incurred. Your employer may withhold some shares or stock to help cover the tax liability of your equity compensation, but it may not be enough, depending on your particular tax situation. 

If you don’t already, consult with a tax advisor specializing in equity comp to plan for any potential tax events coming in 2025. In addition, you may want to consider making quarterly estimated tax payments to avoid any big tax bills at the end of the year.

Maximize Your Equity Compensation’s Value

You have some big decisions to make about your equity compensation—decisions that can have a lasting impact on your ability to achieve your long-term goals. Should you sell your shares this year or hold onto them for the foreseeable future? Should you do it if you’re given the option to purchase shares at a discounted price? 

The important thing is to consider how your equity compensation fits into your financial life, meaning your decisions should align with your long-term goals and needs today. When appropriately managed, your grants can contribute effectively to your overall financial growth. People who leverage equity compensation thoughtfully have the potential to achieve big dreams like enjoying an early retirement, funding a start-up, or creating generational wealth for their family.

Set Goals for Diversification

When vesting schedules go unchecked, your portfolio can become overconcentrated in equity compensation. Too much employer stock can expose your portfolio to concentration risk, so employees with equity comp need to review their asset allocation regularly. Your traditional income (a salary, contract, or commission) depends on the company’s health and performance and your portfolio.

Selling a portion of your equity grants and reinvesting in other assets reduces this concentration risk—enabling you to create a better portfolio to balance risk and growth opportunities. Regularly assessing your risk tolerance and adjusting your portfolio helps protect you from market volatility while staying aligned with your long-term goals. A financial advisor can help you accomplish this, especially if you’re unsure what your risk tolerance is or how to properly diversify your portfolio to align with your needs and goals.

Simplify Your Equity Compensation Management

You’re busy enough—it’s unlikely you want to spend hours each month reviewing and managing your equity compensation. Yet, it’s important to stay on top of what’s happening with your granted options and shares. You may find it helpful to use tools or apps to track your vesting schedules, as well as the market price of your company stock and your overall portfolio.

However, keep in mind that investing is a practice intended to reward those who are patient—and watching the market movements too closely can cause anxiety or lead to impulsive decision-making.

Like any other part of your financial life, being organized can help relieve some stress and make things easier to manage. Again, this is something a financial advisor who is well-versed in equity compensation can also help you accomplish.

Plan for Liquidity and Cash Flow Needs

While equity compensation can be an effective long-term driver of growth, it may lack liquidity in the short term—especially if you’re granted stock options or performance-based grants.

If you do have specific more short- or mid-term plans for your money—buying a home, paying for college, or starting a business, for example—you may need to work with an advisor to develop a plan for addressing those liquidity needs.

Consider creating a reserve or emergency fund that would allow you to cover the tax liability of exercising your stock options or selling RSUs when needed. Doing so would enable you to tap into your funds without disrupting your other financial plans.

Stay Updated on Company Performance and Market Trends

Staying informed about your company’s performance and market conditions is key to managing equity compensation effectively. If you can, pay attention to big announcements and other important news like earnings reports, stock price changes, and broader industry trends that could influence the value of your equity. Being well-informed empowers you to act decisively, which can help minimize risk and enable you to pursue opportunities as they arise.

Since market fluctuations and company performance can affect the value of your stock, staying informed throughout the year may help you make timely decisions. Keep in mind short-term volatility can happen, and it’s important to think with a broader perspective before making any major decisions about your portfolio.

Ready to Take Control of Your Equity Comp in 2025?

By prioritizing a few of the resolutions we shared above, you can take control of your equity compensation—transforming it into a cornerstone of your financial strategy. As you embark on the new year, make thoughtful, forward-focused decisions about your equity compensation. Doing so can help you lay the groundwork for long-term stability and growth.

Need help managing your equity compensation? Our team is experienced in addressing equity compensation concerns, including their complex tax treatment. Reach out today to learn more about how we can help.