‘I partially support my partner of 12 years as his business is, sadly, failing’: I’m 33, and have $300,000 in company stock. Should I sell those shares to pay off my debt of $56,000?

I’m 33 years old, I currently earn just over $ 120,000 a year, including an annual bonus, and my company has given me about $ 300,000 in capital to the company, even though our stock is new, so it is constantly changing up and down. . I put about 6% on a 401 (k) and another 4% on personal savings, investments, and emergency cash.

As for debt, I have about $ 35,000 in student loans, $ 5,000 in credit card debt, and $ 16,000 in personal loans. I don’t have the car payment. I am partially helping to support my 12-year-old partner, as his business is unfortunately failing, but he will not let go of the business. Therefore, a portion of my income goes to help cover bills and expenses.

The big question is, do I have to sell my company’s capital to pay off my debt? Or should I continue to pay off my debt and allow my actions to grow? I realize I would have to pay pretty high taxes because of the stock gains, so I have to keep that in mind when selling. Thank you very much for your contribution and thank you for your column.

In debt with capital

Dear debt,

You have come a long way in a very short time. The average salary in the US for someone your age (between 25 and 34) is around $ 50,000 a year, so you’re overweight professionally and with a 12-year relationship to suit you, you’re also ahead of the game personally. and clearly living your best life. You don’t have to pay for the car, which is also an advantage. So far so good.

Before analyzing your answer, I will offer you the first of the two unsolicited tips and emphasize the importance of living according to your possibilities. If only we could take that advice to heart! We are all guilty of writing, sometimes responsibly, from time to time. Your student loan debt was clearly money well spent, and your personal and credit card debts make up a smaller proportion of your overall debt.

That said, it’s important to clear your credit card debt every month and, if possible, avoid paying interest rates on a personal loan. It makes no sense to pay off your debts if you accumulate a similar amount in the future. This should be the biggest lesson in this instead of using your monthly income compared to your stock options to get back to black status.

Your student loan debt was clearly money well spent, and your personal and credit card debts make up a smaller proportion of your overall debt.

Before selling shares, it would not be unwise to consult with a tax advisor. As a result, property compensation awards for services rendered are generally subject to ordinary income tax at the time they acquire or take ownership of the capital, says Timothy P. Speiss, tax adviser to the practice of advisers. of personal wealth at Eisner Advisory Group LLC.

“If you awarded the prize in 2022, a combined federal and state graduated rate could approach 40% (or more) before local tax, employment tax and additional considerations and other facts. Need confirmation and you should check if you have to pay fairly high taxes due to possible gains in the current or future sale of the shares, ”he says.

“Your $ 56,000 debt level is manageable considering your gross income and asset values, however, you should review interest rates on loans and consider repaying those amounts, especially when interest rates, and interest costs don’t seem to be tax deductible, they exceed the return on investment of your assets, “he says. .

Continue to show the same compassion you show your partner and your business, but keep the same critical eye on every effort. It will help you both in the long run.

And now for my second unsolicited advice – talk to your partner about your business plan. You want to balance your dream support with the cold reality of business viability. You may need to hire an independent, third-party consultant to help you navigate your partner’s approach to your business. You want to help him make the right decision.

Sometimes it’s hard to let go. But doing so could result in the sale of the business, the incorporation of a new business partner, a co-investor or even the start of a new business, Speiss adds. “Considering these suggestions, preserving your own income and assets is critical. If the business ceases, you could still help it cover its bills and expenses.”

The good news is that your debts are manageable and do not require you to sell your company’s shares, which you may regret later, and you also have other issues to deal with that are just as urgent. Your partner’s business and your commitment to avoid accumulating even small debts if you don’t have enough money set aside to pay them off.

Continue to show the same compassion you show your partner and your business, but keep the same critical eye on every effort. It will help you both in the long run. Sometimes these are the things you leave on the floor of the spice room; in this case, what questions did you ask no ask in your letter: this can provide the clearest perspective and ultimately be more enlightening.

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