For me, saving is all about priority management:

1) Savings for retirement. At the very least, you should be getting the full company match. Check out some of those online calculators to figure out how much needs to be going into the 401k/IRA to meet your retirement goals.

2) Savings for an emergency. If you lose your job you ought to have enough to survive for a couple of months without having to run up the credit cards. Basically, set aside enough to pay the rent/mortgage, utilities, health expenses, transportation expenses (remember these go down though), and food. Remember, in an emergency you'll be able to cut back on a lot of more frivolous stuff like eating out, movies, cable TV, etc.

Company stock is not a good choice for this kind of savings because there are often restrictions on when you can cash it in. Just figure out how much you need and stash it away in a savings account where you won't be tempted to take it out. I keep mine in a separate bank with no ATM card just for that reason.

After this is fully funded, you can pretty much ignore it until you need it, although you should reassess your expenses every so often, especially if your life status changes (e.g. you buy a house, get married, have a kid, etc.)

3) Savings for a house. Obviously this doesn't apply if you're already paying a mortgage, but if you're renting, you should be putting money here. Owning your home is still a great investment, especially if you plan on staying put for a while.

Your company's stock purchase plan might fall into this category, but don't put all your eggs in one basket here either. My company stock is in this category, but I put a lot more of this money into CDs rather than stocks because I plan on using it relatively soon. Be careful about how long you are required to hold company stock with this one.

4) Savings for mad money, expensive toys, gift giving, etc. A savings account is probably fine for this, although your company stock might fall into this category too.

Are others investing non-retirement funds?

I have my 401k in non-company stocks but I found it fairly easy due to a paycheck buying program to buy company stock.

I drop $20 a paycheck and pick up a share each week. I've since moved on to online stock programs and invest what I can there in addition to my 401k.

But the low barrier to entry, no fees and dividend reinvestment made this a great way to start. I wound up with 2k in stocks without much effort.

Is it common to only invest for retirement? My parents were pretty poor with money and I have no clue what's normal.

There is a HUGE difference between stock compensation and any stock he had in his 401k. Bankers get paid a large portion of their salary in the form of restricted stock....period. They can't take it in any other form. Any assets in his 401k he is free to move around at will which I'm sure he did. Citi might have a matching program where they might have given him stock for his 401k but we are talking small amounts (remember you can only contribute 15.5k to your 401k each year). I wouldn't feel too sorry for the guy. I'm sure he has enough to get by on, but it still hurts to see 1/3 of your wealth evaporate overnight.

I'm no investment guru or anything, but even I know that you don't put all your eggs in one basket!

And, yeah, I do get a nice discount on the company stock where I work, and I do put some money into it, but I'm not going to put myself in a situation where I'm dependent on one company for my financial security.

A) You get a better rate at buying your company stock than you are at buying just any random stock, or you got them through options over the years, meaning that you never really paid your "Sticker" price on them.

B) If you work for a major company in a major sector that makes up a significant part of most stock indices,the market goes when your company goes anyway.

Anyone who has read Cramer knows that this is one of personal finance mantra's and he started thestreet.com to help individual investors cut out the middle men of brokers (some can be real slime). Cramer details that investing in your own company's stock is terrible many times throughout his writings.

Anyone who dabbles in short term investing knows the risks and is willing to take them for bigger gains, bashing Cramer for being too short term is nonsense because he provides sound financial advice to people who can't afford the risk in many of his books and publications.

The people I really feel sorry for are the top executives. After losing billions of Dollars in stock value, most of them might only be worth a few hundred million now.

No one on Wall Street wants to take compensation in the form of stock. The fact of the matter is that we all have to and it comes with heavy restrictions. The reason we get restricted stock is that people move from bank to bank all the time and it is a way of preventing people from moving around as much. Also people who have no idea what Investment Bankers do should really just keep their mouths shut, although it does provide some comedic relief to hear some of your responses.

I live in Peoria, so I'll get students who work for CAT, invest entirely in CAT (because they believe in the company), and live in Peoria. It's the trifecta of shitty ideas -- if CAT tanks, they'll lose their job, destroy their retirement portfolio, AND the local economy will be so deep in the shitter it'll be impossible to get another job without leaving town.

CAT's a great company to be investing in these days; its global positioning and the building booms in China & India mean it's turning in record profits while the rest of the economy flounders. But still, living in Peoria where CAT drives our local economy, I feel like I'm ALREADY invested in CAT, and it'd be a little dangerous to put a bunch of money in their stock when the health of my local economy already depends on CAT's health.

Only listen if you're smart enough to know that:

1.) You should still invest in your 401(k)
2.) ESOPs are still a good idea, generally, even if you sell them quickly after they vest
3.) Most of the real loss occurs in the form of devalued executive bonuses; funny how we'll report Jimmy Cayne's bridge habit but fail to mention the decrease of his net worth from 1.5 billion to ~12 million before JP raised the bid.

@JustAGuy2: Working on Wall Street, I can tell you that every Investment Bank has the same policy. It's the most basic way of keeping employees after their bonuses are paid out from jumping ship. If you do you lose half from your vested stock options; and everyone who says these guys should have known better should realize even deleveraging as much as possible would still have their past 3 bonuses in BSC stock. Please don't jump to conclusions when you don't know the facts regarding the situation.

Take a regular Joe working for a large company. Sure, he knows what's going on in his own department but he has no idea what it is like in the offices in other states. His impact on the bottom line isn't that big. It's not like he can increase the worth of the stock all by himself.

My portfolio base is 50/50, meaning 50% stock and 50% certificates, and in the stock I keep no more than 20% in any one type of stock. When I try to invest more the little sign I placed over my desk always reminds me why I don't.
(BTW that sign always draws out at least a chuckle to any one who sees it while going by)

@Snarkysnake:

FYI, a lot of companies do have policies that prohibit people hedging their company shares or options. If it's not a brokerage, they probably won't catch you (since they don't have the account visibility), but if they did, you'd lose the stock comp.

You're entirely correct. I was referencing companies that are NOT brokerages... And I was assuming that you are not part of executive management. But as usual,I didn't make it clear...Even that said, you must not run afoul of "material ,non published information" when you do this.

Who the heck is "freemoneyfinance"? Anyway, agree with pretty much everyone that this is bad advice. You should DEFINITELY invest in company stock if it's part of an employer match or other discounted rate -- that there is just free money (er, equity).

But yes, don't be overinvested in any one area: diversity, eggs, basket, etc.

@mynameisnate:

"...when you work in a public company and you play an active role, you have some heads-up on your companies performance based on the overall office environment, as well as wall street's expectations. I'm not talking about insider trading..."

Any employee of a publicly traded company with access to information that enables prediction of stock performance is an insider almost by definition, and is subject to lots of SEC scrutiny. The rest of us shouldn't kid ourselves that we know enough to base both our next paycheck and our retirement income on one company. There are good social and emotional reasons to make some investment in our employers, but we should always be financially prepared for any given investment to tank. That includes our employers.

Like anything else, diversification is important. Don't have a ton of money in your company stock, but you can say that about any type of investment.

@Snarkysnake:

Won't work in this case. If you work for a brokerage firm, all your investment accounts need to be at that firm or a related firm, so they can monitor your trading activity. Shorting the firm's stock is strictly prohibited and a good way to get fired, if not pick up an NASD sanction along the way.

That is no guarantee that you're safe...Ever heard of a little company called Texaco ? Big oil, gold plated safety ,right ? They lost a huge lawsuit to another little startup named Pennzoil in 1985 and had to declare bankruptcy (in '87,I think) . Their stock never went to zero,and they were eventually acquired,but employees that retired during the period of uncertainty took a real haircut.The point is,diversification is better than concentration in one stock. Remember- your retirement is hostage to the dumbest CEO that your company will ever hire if company stock is the largest part of your savings!

Well,just to clarify...

If you DON'T want to hold your company's stock and they "suggest" that you show loyalty to the company (Like China "suggested" that England return Hong Kong), Just open a brokerage account and short an equal amount that you are "suggested" to own. Now,you'll pay commissions. But, you won't be trapped in something that you don't want to own. Your net position (net of those pesky commissions) will be...Right where you started. You'll get the upside if by some miracle your company is not run by corrupt morons and lose the money on the short side.If it really goes Tango Uniform,you make the money on the short side and take it in the bum on the long side.This last outcome will give you the psychic satisfaction of telling your boss on your last day of employment that you have been betting against him and "them" all along !

what are you supposed to do when your company matches your 401k with their own stock and doesn't allow you to move your money elsewhere? I used to work for a large homebuilder and having 50% of my 401k in one stock scared me. Luckily i left before their stock went from $50/share to $20

In Bear's case, a lot of employee compensation came in the form of stock with a vesting period. For more senior employees (not CEO-level, but not in the mailroom either), 1/3-1/2 of total comp could come in shares, which were locked up for 3-5 years. So, for an SVP making $700k, he might get $300k in stock, which he couldn't liquidate for five years.

You have to be enrolled in the 401k plan for a couple years before you can use the company matched money on something other than company stock.

Apparently not. Even yearly reminders haven't done the job:

2008: Why You Shouldn't Invest in Your Company's Stock, The Consumerist
2007: What Enron Taught Us About Retirement Plans, Investopedia
2006: Enron woes reverberate through lives, USA Today
2005: The Perils of Your Company's Stock, New York Times
2004: The Case Of The Vanishing 401(k)s, BusinessWeek
2003: The Post-Enron 401(k), Forbes
2002: Odds workers will get Enron payoff: 'slim', USA Today
2001: The Danger in a One-Basket Nest Egg Prompts a Call to Limit Stock, New York Times

All I know is the stock market collapses when too many people pull out too much money all at the same time...

So carefully read the terms of the incentives your company offers and consider the risks. If it seems like a crappy deal or if it seems too good to be true, I would probably stay away.

I know people who have gone into that industry and you could not pay me enough to do it. Well, maybe if we're guaranteed $500,000 plus bonus, but $100-$300 is insulting to the hours they put in.

@simonkapo: However, you can pull out money and buy other stocks with the ''profit''.

People should look closely at their personal risks (e.g. what industry they're in, their ability to handle being unemployed) and invest to hedge those risks. I wouldn't want to discourage anyone from taking advantage of a company match program, but many former Enron employees might wish that had purchased just enough stock to get the company match and put the rest in an index fund.

Our company's 401(k) doesn't even allow us to purchase shares in our own stock. Instead, they're all mutual funds. I wouldn't mind owning a *little* stock in order to boost company loyalty and feel personally invested.

Some public companies (and probably Bear Stearns, although this Consumerist article and the cited "Street" article don't say one way or the other) have investment programs where for each share of company stock the employee purchases, the employer will buy a share and put it in the purchasing employee's name.

Ex: Company X has a matching program. Their stock is sold for $20 per share on the NYSE.

Employee A spends $4o to buy 2 shares of stock. Company X will then give Employee A 2 shares of stock as part of the matching program. Employee A now spent $40 to obtain $80 worth of stock (4 shares).

Usually in matching programs the employees are prohibited from selling the stock for a certain amount of time.

Basically, my point is that purchasing company stock isn't a cut and dry issue. Factors such as a matching program must be taken into consideration, and both The Street and The Consumerist failed to mention them in their respective articles.

But I disagree with the post, when you work in a public company and you play an active role, you have some heads-up on your companies performance based on the overall office environment, as well as wall street's expectations. I'm not talking about insider trading, but there is obvious money to be made.

Do people not learn?

Diversify is always the best option for better retirement.