Taking stock
When your base salary won't cut it, here's how to use your equity compensation to stay afloat (and stay together).
Hi, friends. It’s Douglas, back with real-life money stuff today.
Many of my clients will never forget the day they landed a new job: the excitement, the pride, and of course, the comp package. They try to negotiate, as almost everyone should, but when they push harder for a higher base salary, they end up with a larger stock award instead.
Great, we both say, and it is great. More is more. But when that first paycheck hits their account, the deposit feels underwhelming. What looked like a great deal on paper doesn’t feel like one at all.
Over the last decade, compensation models have shifted heavily toward equity. What used to be a perk for senior leaders has trickled down across job levels and industries. Companies now lean on stock awards, options, and deferred compensation to attract and retain talent without adding more to payroll. On one hand, equity is great. According to a 2024 Morgan Stanley at Work study, more than four-in-five employees (84%) say they would be interested in receiving equity compensation. But in the practical scheme of things, and the speed at which things change these days, an equity-heavy compensation package can start to feel like golden handcuffs. All the time, I see how confusing it can be for employees to fit and figure this into their financial lives.
The truth about incentive stock pay is that it’s not just a perk but a system to keep you invested in your company. So, you know those stock awards that vest over the next four years? They’re designed to keep you showing up, hitting your targets, and thinking twice before walking away. It’s a great deal for your employer. They get to conserve cash, boost retention, and make you feel lucky to be there even when your cash flow isn’t getting the boost it needs.
But for households where stock-based compensation is a big part of overall pay, it can create a real mismatch between what you earn and what you can use. I see it all the time in my practice. Clients who look great on paper feel cash-strapped, because so much of their income is locked up in company stock. When you don’t—or can’t—plan around this, many employees end up having to sell their stock just to pay their bills.
You want to take control before the equity comp controls you.
One of the biggest missteps I see couples make is treating all income the same: base pay, bonuses, commissions, and stock all get tossed into one big bucket, as if every dollar behaves the same. It doesn’t. Incentive-based income comes and goes, often on a schedule you don’t control, which makes cash flow unpredictable.
Your base salary is steady and reliable. Ideally, it’s what should be funding your lifestyle expenses like housing, food, childcare, and insurance premiums. Because when variable income has to cover those same expenses, it’s like building your budget on sand. The foundation keeps shifting beneath you. A big vesting event can make everything feel gravy, but when there’s a lull or down market, it can throw everything off balance. Since most people spend differently when they feel flush and pull back when they don’t, it makes it difficult to be consistent with your spending or savings. To make things trickier, incentive compensation is taxed differently, and what’s withheld for taxes isn’t always enough, which can quietly create a surprise tax bill down the road.
When part of your income comes from incentives or stock, your cash flow needs more than a budget. It needs a system. I like to plan around this simple, but effective, structure:
Base pay covers lifestyle. Design your budget around your base salary (if possible).
Incentive compensation generates wealth. Before any money hits your account, map out what percentage will go to lifestyle, savings, or investments.
Now, let’s be real: not every household can live entirely within their base salary(ies). For many families, expenses outpace their paychecks, and selling vested stock is how they make their lives work. Sadly, I know of several large companies that seemingly structure their compensation this way by design. (Remember, from their standpoint, it’s about having your skin in the game.) As Heather often says, don’t conflate institutional failures as failures of your own. Costs are rising. Life is expensive. You do what you have to do.
If you must sell vested stock to supplement your base pay, I suggest building your cash flow model around: (1) when shares vest, and (2) what they’re worth after taxes. Map out your vesting calendar, estimate the after-tax proceeds, and decide in advance what portion needs to cover expenses versus savings or investment goals. Since stock prices move daily, plan for a range of outcomes and lean conservative. So, if your shares were granted at $100, assume they’ll vest closer to $85 or $90. That cushion protects your budget when the market dips, so you’re not scrambling if reality doesn’t match the number you had in mind.
Let’s build out a real-world example:
Your base salary provides $7,000 a month after taxes, but your family’s lifestyle runs closer to $9,000. That’s a $2,000 monthly gap you need to plan for.
Assume your incentive stock vests quarterly, and each vesting event nets about $9,000 after taxes at today’s stock price. That’s roughly $3,000 a month in supplemental income, which is more than enough to close the gap. But because markets move, don’t count on the full $9,000 every time. Build your plan assuming the shares might vest 10–to-15 percent lower. That conservative adjustment brings your expected quarterly proceeds down to roughly $7,800–$8,100, or about $2,600–$2,700 a month for the quarter.
It still covers the $2,000 monthly shortfall and leaves several hundreds of dollars each month (about $600–$700) that you can consistently save or invest. Maybe that money goes into a brokerage account, college fund, or retirement plan. By modeling it this way, you can see how quarterly vesting fills the shortfall in your monthly cash flow and gives you room to keep building wealth when things go right. No surprises, no scrambling, just structure.
None of this works if you don’t already have a clear handle on your budget and cash flow. You need to know what it takes on average to run your household every month before you can decide how incentive pay fits in. Because without that clarity, you’ll always be reacting to your incentives instead of maximizing them.
And here’s the other sticky part. When a household depends on stock-based or variable pay, the money conversation can get complicated fast. One person might see vested shares as “extra money,” while the other knows that hey, we really need this to balance our budget.
This is where clear expectations make all the difference. Start by agreeing on what your incentive pay is for: is it there to support your lifestyle, build wealth, or both? Talk about how much of it needs to be available for spending versus how much stays earmarked for future goals. When you both understand the purpose behind each dollar, it’s easier to stay aligned when markets move and the value of your incentives fluctuate.
During your regular money talks, review what’s coming in, what’s vesting, and how your spending feels in real life, because you’re going to need to make adjustments along the way. Remember, the goal here isn’t to predict every possible outcome, because you can’t. But you can try to create some controls to make this work for you and your family.
Do you have a unique compensation package? How do you make it work? We’d love to hear from you.
Live from New York, it’s Money Together!
I get to go on live TV a fair amount, but this was different. Sitting next to Heather on the NBC News couch to talk about our new book was something else. I may pride myself on being good in front of a camera, but Heather? She performed. You see, she’s a theater girl. It’s in her blood. She’s a natural.
I’m not afraid to say it — she outperformed me. Like, genuinely put on a clinic. Watching her hit her marks, deliver lines, and light up the set was unreal. I wasn’t even a little mad about it. Just proud. Your girl is talented beyond belief. Naturally.
The life of a showboy (and girl)
Can’t stop won’t stop. Beyond 30 Rock, here’s where Money Together’s taken us this week:
We sat down with CNBC’s personal finance team to talk about surviving even the trickiest money convos with your S/O. There’s some real gems in this Q&A.
WealthManagement.com invited us on their “Focused on the Future” podcast to discuss the challenges and lessons we’ve learned from working with each other all these years. It was a pleasure, Suzanne!
For the bookworms out there: the good people at Readwise.io were kind enough to excerpt Money Together in their newsletter this week. Also, the amazing Ravi Shah shared his favorite highlights from our book in his popular newsletter, Reads with Ravi.
I caught up with Brew Markets to chat about the book, a little markets and social media at the end.
There’s so much more to come, and we can’t wait to share it with you.
Money Together has arrived! Order now in your format of choice.
Love it already? Leave us a review on Goodreads and wherever you purchased!
Want more Heather and Doug? Have us come talk love and money for your organization, virtually or IRL. Reach us here.
Connect with us on social: @averagejoelle + @dougboneparth
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