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If you ask most people, they’ll say it’s about market timing, holding on too long and watching the price fall, or selling too early and missing out on a rally. And while that's a common source of anxiety, it’s not the real mistake. It’s just a symptom of a much deeper, more fundamental error.
The most expensive mistake isn't tactical; it's psychological. It’s a subtle mental miscalculation that happens the moment you're granted your shares, and it quietly distorts every decision you make afterwards. It’s the reason smart, logical people end up with dangerously concentrated portfolios and unexpected tax bills.
Forget about trying to predict the stock market. Let’s expose the real trap and give you a framework to avoid it for good.
Let's cut straight to it. The single biggest mistake is this: You are mentally treating your Restricted Stock Units as a stock you already own, when you should be treating them as a cash bonus you haven't yet received.
Read that again. It's a subtle distinction, but it changes everything.
From the moment they vest, the IRD doesn't see your RSUs as a capital gain or a nice little investment perk. They see it as pure, taxable income, a non-cash bonus paid out to you for your work, just like your salary.
When you fail to make this mental shift from "my investment" to "my bonus," you walk directly into two massive and costly financial traps that can undermine your entire wealth-building strategy.
This simple mental miscalculation isn't just a matter of perspective; it has real-world consequences that can impact your net worth and create unnecessary stress. Here are the two traps that are sprung the moment you think of your vested RSUs as an "investment" instead of "income."
When you think of your vested RSUs as "your stock," you subconsciously downplay the immediate tax liability. It feels like an asset that might be taxed later, when you sell it. But when you correctly think of it as a "cash bonus," the tax becomes obvious and unavoidable.
Let’s run the numbers. Imagine $100,000 of your RSUs vest.
This difference is critical. Most US-based tech companies use a "sell-to-cover" system that withholds some tax, but it's often an estimate based on a standard rate. If you're a high-earner in New Zealand, this withholding is frequently not enough to cover your true marginal tax rate. Thinking "income first" forces you to proactively set aside extra cash for a potential end-of-year tax bill, protecting you from a nasty surprise.
This is the more subtle but far more dangerous trap. When you feel you already own the stock, a powerful psychological bias called the Endowment Effect kicks in. We instinctively place a higher value on things we own, making it feel much more difficult to part with them. Selling feels like a "loss," even if it's the most logical financial move.
This leads to inertia. You do nothing, and your holdings in your company's stock grow with every vest, creating a dangerously concentrated position. To break this emotional attachment, you need to reframe the decision with one magic question:
"If my boss handed me a $61,000 after-tax cash bonus tomorrow, would I immediately use 100% of it to buy my company's stock?"
For almost everyone, the answer is a clear "no." You'd probably pay down some debt, put some towards a house deposit, and invest the rest across a range of different assets. So why treat the stock bonus you received any differently? Correctly seeing it as a "cash bonus" allows you to make logical, diversified decisions, not emotional ones driven by default.
Avoiding these traps doesn't require complex financial wizardry. It simply requires a disciplined, repeatable process. By treating every RSU vest as a cash bonus event, you can use this simple 3-step framework to make a smart, logical decision every single time.
This is the entire key to the system. The moment your shares vest, perform a mental transaction. In your mind, you have just sold 100% of the shares at the current market price. The after-tax proceeds are now sitting in your mental bank account as a fresh pile of cash.
The question you need to answer is no longer the emotionally loaded, "Should I sell my company stock?"
It's now the clean, logical, and far more powerful question: "What is the smartest thing to do with this new cash?"
This simple re-framing breaks the Endowment Effect and frees you from the inertia of default ownership. You are now in active control.
Smart decisions are made before the money arrives. Before your vesting date, you should already have a plan for how you will allocate this new cash. A simple "bucket system" is the most effective way to do this. Your buckets might look something like this:
Now, with a clear head and a pool of capital in your "Growth Bucket," you can make a conscious, unemotional decision about what to do next.
You can now ask: "Does it make sense to reinvest some of this cash back into my company's stock as part of my overall, well-diversified portfolio?"
The answer might be yes! If you have a strong belief in the company's future and want to maintain a small, strategic holding, that is a perfectly valid investment choice. But the critical difference is that it is now an active choice to buy, not a passive failure to sell. You are choosing to allocate your cash to that investment, just as you would choose to buy any other stock or fund on the market. That is the definition of taking control.
The biggest breakthroughs in managing your finances are rarely about finding a secret investment or a complex tactic. More often, they come from a simple but profound shift in perspective.
When it comes to your RSUs, that shift is everything. Stop seeing them as a stock you own and start seeing them as a cash bonus you receive. This single mental flip protects you from crippling tax surprises, breaks the powerful grip of emotional attachment, and forces you to make conscious, deliberate decisions about your money. It puts you in complete control of turning your hard-earned compensation into lasting, diversified wealth.
This framework gives you the power to make smarter decisions for every RSU vest. But applying it to your specific numbers, your unique financial goals, and your existing investment portfolio is where a generic framework ends and a personal strategy begins.
If you want to create a clear, repeatable plan for your RSU wealth, one that aligns with your goals for buying a home, achieving financial independence, and planning for retirement, I invite you to schedule a complimentary, no-obligation RSU Strategy Session.
In this confidential discussion, we will:
Take the first step towards mastering your RSU wealth today.