10 Ways Stock Compensation Can Make You Happier
After reading this article, test your knowledge with a fun, interactive quiz on the basics of stock compensation
From being solely a subject for philosophers and poets, the pursuit of happiness has become a pragmatic, widely acknowledged arena of interest for companies and their employees. For example, books such as Happiness At Work and Real Happiness At Work have joined bestsellers on the general topic of contentment, such as 10% Happier, The Happiness Project, and many others.
Stock compensation, if fully appreciated and understood, can improve happiness. Based on my own observations, the 10 points in this article show how.
1. Wealth Creation
When your company's stock price increases—whether you have grants of stock options or restricted stock/RSUs, participate in an ESPP, or own company stock—your wealth increases, perhaps substantially. While the accumulation of wealth is an obvious way in which stock compensation can improve your quality of life, there is more to equity comp than simply recognizing big gains. What really matters for your financial wellness (and overall happiness) is what you do with that wealth and how you fit it into your funding of personal financial goals. The extra income can also finance uplifting life experiences, such as travel, which research shows can make a more lasting contribution to your sense of well-being than the acquisition of extravagant material possessions.
2. A Sense Of Anticipation
Wealth accumulated from your company's stock plan can bring satisfaction and financial security, representing a significant part of your net worth. Moreover, research has found that anticipating the use of these gains can be even more enjoyable—such as the allure of an upcoming vacation, the secure feeling of having well-funded retirement or college savings, excitement about the purchase of a home, or the comfort realized from much-needed house renovations.
3. A Feeling Of Being Special
Eligibility for stock grants of any type is limited. At many companies, long gone are the days when everyone received a stock grant of some kind, or at least a grant beyond one made at hire. Therefore, if you get yearly or occasional grants, you're typically receiving a benefit many employees do not get. Mindfully feeling grateful, appreciative, and enthusiastic about something that's special is another way to further your own happiness. To avoid dampening your gratitude, try not to compare your grants to those that other people receive.
4. ESPP Participation And Discount
Most employee stock purchase plans (ESPPs) are a good deal. They offer a discounted purchase price, and some use a lookback to calculate it. Everyone loves a discount; getting one from your company should help to make you happy.
5. Control Over When You Receive Income And Pay Taxes
You have the opportunity to avoid immediately triggering ordinary income and taxes when you receive a grant of stock options or stock appreciation rights or when you enroll in an ESPP. Although lowering or deferring taxes should not drive your decision-making, these forms of stock compensation helpfully allow you to carefully time when you receive the income and have to pay taxes on it.
6. Donations And Gifts Of Company Stock
Studies have shown that charitable people tend to be relatively happy overall. Donations of appreciated company stock you have held long-term can support organizations and causes that you believe in. Using stock donations for your act of kindness can also be more tax-efficient than using cash, as you're donating the full value of the shares and not the net proceeds from first selling the stock. Gifting company stock to lower-income relatives and friends is another form of generosity that can bring feelings of happiness.
7. Being An Owner In Your Company
When you receive a stock grant or acquire company stock, you gain an ownership interest in your company. This can make you happier, as you're sharing directly in the success that your company derives from your efforts. Ownership often brings more control over your work life and perhaps even some input into your company's decisions, making you happier at what you do for a living.
8. New Friends
Bonding with other people is a source of happiness. Stock compensation can be a tie that strengthens your relationships with colleagues: talking with co-workers about ways to handle grants and taxes, or how you'll use gains from equity awards or ESPP participation. Be careful, however, not to let enthusiasm about stock compensation or co-workers' suggestions lead you into unadvisable risks, such as overconcentration in company stock instead of diversifying. Should your company's stock price drop or experience excessive volatility, an unnecessary risk gone bad can diminish happiness.
9. Feelings Of Financial Security
Financial security brings happiness. Even if your 401(k) plan is well funded and you are expecting meaningful Social Security benefits, you will probably face a gap between the cash these sources can generate and your spending needs and wishes in retirement. Income from stock compensation and company stock holdings, whether in dividend income or from selling shares, can help you plug that gap. The reduction of financial stress and worries about falling short of your retirement-income needs can definitely boost happiness, especially as your career matures.
10. Mindfulness And Meaningfulness
When your honest, ethical, hard work elevates your company's stock price, equity compensation rewards you. Your interests align with the interests of the company's shareholders, who also benefit from the price increase. Try to be mindful of the very real boost that your daily diligent efforts can give to your company's stock price. That can heighten your feelings of engagement, optimism, and happiness by providing additional meaningfulness to your job. In doing so, it gives you the right mindset for professional and personal success.
Bruce Brumberg is the editor-in-chief and co-founder of myStockOptions.com.