I’m 30 with only $140k in net worth but here’s my plan to triple my money from here

Maybe it’s because of where Reddit grew up, in the high-cost city of San Francisco. Maybe it’s because so many of its early users were high-earning tech worker types. Whatever the reason, Reddit has to be one of the weirdest places on Earth, the place that tech millionaires and employees at pre-IPO unicorn companies flock to… seeking free financial advice.

Just a couple weeks back, I noticed a post on Reddit from a 30-something single tech worker with a $140,000 net worth and a $320,000 annual salary, wondering what she should do with her more than $1 million worth of “restricted stock units.”

For most of us, the first response to such a question would be another question: What the heck is a restricted stock unit?

(By the way, a restricted stock unit, or RSU is sort of like a stock option. It’s a form of payment your employer can grant you in lieu of cash. The main difference is that with a stock option, you get the “option” to buy company stock at a discounted price, so that you can turn around and resell it at market price. With an RSU, the company just plain gives you its stock for free, so that you can then sell it or keep it).

Now that I’ve got an RSU, and know what it is, what do I do with it?

Now that we’ve got that out of the way, here’s our Redditor’s dilemma:

Sometime soon, her company will hold a “liquidity event” permitting her to sell all RSUs that have “vested” in her ownership so far. She’ll have to pay tax when she acquires the RSUs, but even after deducting income tax, she anticipates the RSUs will be worth “about $1M” after tax.

Looking ahead, she sees a strong likelihood her company will IPO soon, and she’s anticipating such an IPO will grow the value of her $1 million in RSUs by anywhere from 50% to 200%. Of course, there’s always the risk someone else will build a better tech mousetrap, causing her $1 million in RSUs to lose value, falling as much as 50%.

So what should she do? What she’s planning to do is cash out $350,000 of her $1 million in RSUs, and use $200,000 of this cash for the down payment on a $1 million house. The remaining $650,000 worth of RSUs, she will hold onto in hopes a successful IPO will turn that into $1.3 million, or even $2 million.

So is this a good plan?

Congratulations. You’re a millionaire. Now try not to lose it

I’ll say this much: It’s not the worst plan.

Hearkening back to the old proverb that “a bird in the hand is worth two in the bush,” there’s something to be said for cashing in a good chunk of those RSUs for some cold hard cash, and then immediately plowing that cash into an even harder asset like a home. While I’m not a financial advisor myself (and anyone faced with a problem like this one probably should consult a professional), I think the idea our Redditor’s got a pretty solid plan here.

The bigger question is what to do with the remaining $650,000 worth of RSUs?

On Reddit, most respondents urged cashing out even more, rightly pointing out that, by the time the “liquidity event” rolls around, these remaining RSUs will still account for more than half her net worth. “Would you feel comfortable investing half your life’s savings in a single stock,” they ask? Because that’s basically what these RSUs are, pre-IPO “stock” in a single company, and indeed, the same company that pays your salary!

This brings up a second consideration. Our Redditor is earning $320,000 a year. With that much money coming in the door, you might think she could afford to risk the $650,000 in RSUs not tripling as she hopes, and maybe even falling 50% as she fears, because she has such a high income to support her. Problem is, if the RSUs lose 50% of their value, that will probably be because something is seriously wrong with her company, and potentially, seriously enough wrong to imperil her job, and her $320,000 income.

That puts out Redditor at risk of losing both her savings, and her income, in one fell swoop. And the best way to avoid that happening is to sell all the RSUs as soon as she gets them. After all, if her company is as good an investment as she thinks it is, she can always turn around and use the cash to buy stock in it after the IPO… just like the rest of us.