How to Value Stock Options and RSUs for Personal Financial Planning

Equity compensation—stock options and restricted stock units (RSUs)—is one of the most powerful ways tech professionals build wealth. Yet, many struggle with a fundamental question: what are my shares actually worth? Unlike a paycheck, equity is often illiquid, uncertain, and dependent on your company’s performance. Still, with the right approach, you can estimate their value and make smarter financial planning decisions.

Below, we’ll break down how to value stock options and RSUs, factor them into your net worth, and project their potential future value.

Understanding the Basics of Stock Options and RSUs

Before diving into valuation, it’s important to understand what you’re holding:

• Stock Options: The right to purchase shares at a set “exercise price.” Options can be Incentive Stock Options (ISOs) or Nonqualified Stock Options (NSOs), each with unique tax rules. Their value depends on the spread between the exercise price and current (or future) fair market value.

• Restricted Stock Units (RSUs): Promises of future shares once vesting conditions are met. Unlike options, RSUs have intrinsic value the moment they vest, based on the company’s stock price.

For more background, see Navigating the Complex World of Equity Compensation: Key Terms and Concepts You Need to Know.

How Do I Estimate the Value of My Stock Options or RSUs?

For stock options:

1. Find the exercise price (the cost to buy each share).

2. Identify the current fair market value (FMV) of your company’s stock.

3. Subtract exercise price from FMV = spread per share.

4. Multiply the spread by the number of vested options you hold.

If the current FMV is below the exercise price, your options are “underwater” and have no immediate value; though, they may still be valuable in the future.

For RSUs:

1. Find the number of RSUs vested.

2. Multiply by the current FMV.

Unlike options, vested RSUs always carry value, though you’ll owe taxes when they vest. For more detail, see How to Handle Taxes When RSUs Vest: Minimizing the Tax Burden, Selling vs. Holding, and Valuation Tips.

What’s the Best Way to Account for Stock Options in My Net Worth?

Including equity compensation in your net worth requires balancing accuracy with realism.

Approaches:

• Conservative: Only count vested RSUs and in-the-money options. This avoids overstating your financial position.

• Moderate: Include all vested equity and a discounted value of unvested grants (e.g., 50%).

• Aggressive: Count all equity at current FMV. This risks inflating your net worth if company performance changes.

Many professionals choose the conservative or moderate approach for planning, then revisit values as vesting schedules progress. For more insights, see Building a Financial Plan Around Your Equity Compensation: Strategies for Success.

How to Calculate the Potential Future Value of Stock Options

Equity’s real power lies in potential growth, but that’s also where uncertainty comes in. To estimate:

1. Forecast stock price growth. Consider industry trends, company performance, and comparable peers. Many people model conservative, moderate, and aggressive growth scenarios.

2. Project vesting timelines. Map out when options or RSUs will vest over time.

3. Apply potential tax implications. For options, factor in exercise costs and possible AMT exposure. For RSUs, consider ordinary income tax.

4. Run scenario analysis. What if your company’s stock doubles? What if it stays flat? Understanding the range helps you make informed decisions.

For a deeper dive, check out Timing Is Everything: Strategies for Exercising Your Stock Options to Maximize Value.

Taxes: The Hidden Factor in Valuation

The gross value of your equity isn’t the same as what you keep. Taxes can significantly reduce the actual benefit:

• RSUs are taxed as ordinary income at vesting.

• ISOs may trigger AMT if exercised before sale.

• NSOs are subject to ordinary income tax on the spread at exercise.

This is where strategy matters. For example, filing an 83(b) election when granted stock options can shift your tax treatment and unlock long-term capital gains potential. Learn more in The 83(b) Election Explained: How It Can Affect Your Equity Compensation Tax Strategy.

Practical Tips for Tech Professionals

1. Track everything. Keep a clear record of vesting schedules, grant documents, and exercise prices.

2. Use valuation tools. Online calculators or financial planning software can help run scenarios.

3. Revisit regularly. Your equity’s value changes with market conditions and company milestones.

4. Plan for liquidity events. IPOs, acquisitions, or secondary markets can create opportunities to cash out.

5. Work with a professional. A financial advisor experienced in equity compensation can help optimize taxes and integrate equity into your overall financial plan.

A Closing Thought

Valuing stock options and RSUs isn’t about finding a single “right” number. It’s about understanding the range of potential outcomes and how those fit into your broader financial goals. By taking a thoughtful, structured approach, you can account for equity in your net worth, plan for future growth, and make smarter decisions about when to exercise or sell.

At Silicon Beach Financial, we specialize in helping tech professionals turn complex equity packages into actionable wealth strategies. If you’d like to see how your stock options and RSUs fit into your financial future, let’s start the conversation today.