My Company ESPP Has Become My New Property Tax Escrow

You, Me, and ESPP

For a few weeks now my company has been touting their Employee Stock Purchase Plan (ESPP).  I’m new to the company and have never participated in one of these before, so I really didn’t know what to think.  I already have some company stock (via options) from when I was hired.  In my opinion owning those options has been enough.  You never want to own too much of one stock, right?  Definitely not your own company.  After all, being that I’m employed here, I’m already heavily invested in them.

15% Return?  I’ll take it.

Well, a co-worker (who knows I love talking saving money) started talking to me about this plan and told me she was going to do it.  She shared with me the basic concept.  You make automatic contributions (between 1% and 10%) every pay period to a fund, that after six months is used to purchase company shares of stock at a 15% discount.  You are then free to do whatever you want to with this stock.  If you sell it that same day (called ESPP “flipping”), you simply make the 15% discount.  Not bad for six months, right?  That’s an annualized return of 30% less taxes.  Nice.  I’m not going to be getting that anywhere else.  It’s actually more of a return if you look at it like this.

Can We Do This?

My thoughts quickly turned to my property tax self-escrow with Capital One 360.  Why not use the ESPP in place of the Capital One 360 account (currently earning 3%)?  For the record, we have our emergency fund with Capital One 360 as well, so I wouldn’t be pulling ALL our money out of savings, just the property tax portion that I had set up in an extra account (contributing $350/mo.)

My next step was to do some actual, in-depth research on ESPPs and my company’s plan to be sure this was right move for Mrs. PT and I.  You didn’t think I’d just blindly sign-up based on a few co-worker’s suggestions did you?  I’ll share what I learned about ESPPs next week.

Other Thoughts on ESPPs

Here’s a very pro-ESPP post, “the wonderful world of employee stocks” (@ Punny Money), which basically says at the 15% discount I’m getting, I’d be silly not to do it.

This article, “Cash in the Cubicle” (@Market Watch) is also very positive in it’s overview of the ESPP.

A write-up (@Fairmark.com) called “Flipping ESPP Shares” discussed the ethics of doing ESPP flipping, which is what I’d be doing.  Do you think this would be an “abuse of the benefit”?  I really don’t.

Lastly, check out this read (@The Finance Buff) on employee stock purchase plans and how “ESPPs are a Fantastic Deal“.

I went ahead and signed up for the ESPP today, as it’s the last day to sign up.  I’m pretty excited about this benefit and I’m super glad my company rolled it out.  Is anyone else using an ESPP to flip for a quick profit?

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Last Edited: March 7, 2013 @ 12:02 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.