Should you take equity instead of a higher salary?
Deciding between more cash now or more equity later can feel like choosing between two different futures. One gives you certainty for everyday life. The other gives you a shot at a bigger payoff, but only if the company grows and eventually becomes liquid. The right answer depends on your financial reality and the actual odds of seeing value from those shares.
Understanding what you need today
Start with your monthly cash flow. A higher salary helps with rent, childcare, debt, and emergency savings. If taking more equity means stressing about bills, the choice becomes clearer. Salary is guaranteed. Equity is not.
Your decision tree at this stage is simple:
- Do I have at least three to six months of savings?
- Do I expect major expenses like childcare or medical bills?
- Would a lower salary force me into debt?
If cash feels tight, salary usually wins.
How company stage affects equity value
Equity is only worth something if the company reaches a liquidity event. Early stage startups offer bigger slices, but those slices often get diluted. Later stage companies offer smaller pieces, but with more predictable exit chances.
This is where outside context helps. According to reporting by the Financial Times, Meta recently cut stock based compensation as the company shifted resources into AI investments. That kind of move shows how even mature tech companies rebalance equity in response to market cycles, which affects future upside.
In a different look at compensation, AP News highlighted how CEO pay remains dominated by stock and option awards, reflecting how much long term value leadership still expects from equity.
Those patterns tell you something important. Equity can pay off, but only in companies that continue increasing their value over time.
What kind of equity you’re being offered
Equity isn’t one thing. It comes in different forms, and each type affects how and when you might see real money from it. RSUs are the simplest. They convert into actual shares as long as you stay through your vesting schedule. There’s no purchase required, which makes them easier to understand and less risky.
Stock options, on the other hand, give you the right to buy shares later at a set price. This is where taxes and timing start to matter. Before you can judge whether an option grant is valuable, you need to know what kind of options they are. Companies commonly offer either Incentive Stock Options (ISOs) or Nonqualified Stock Options (NSOs). Each one has its own tax rules, exercise timelines, and potential surprise costs.
If you have never dealt with stock options before, it helps to read a clear breakdown of the difference between ISO vs NSO stock options so you know what you are actually accepting. Understanding this early prevents you from getting stuck with a tax bill you did not plan for or options that cost more to exercise than they are worth.
Once you know the type of equity, you can estimate when it might become real money. Options only matter if the share price rises above the strike price. RSUs depend on the company’s valuation at vesting. And both depend on the company eventually offering liquidity, which is never guaranteed.
Building a blended ask
Many employees forget that negotiation is flexible, and timing is important. You can ask for a modest salary bump plus a small equity refresher. This avoids the all or nothing choice and keeps your financial risk in check.
A basic way to estimate equity value is as follows. Multiply the current company valuation by your percentage ownership. Then discount that number heavily based on stage and time horizon. For early stage companies, some people discount by 70 percent or more. It is not a precise formula. It is just a way to see if the potential upside feels motivating.
When equity might make sense
Equity leans in your favor when:
- You already have strong savings
- The company is growing quickly
- You understand dilution and vesting
- You can comfortably wait years for liquidity
If those are true, then owning a piece of the upside can be exciting.
A balanced way to decide
Think of your decision like a personal balancing act between stability and possibility. Look honestly at your cash needs, the company’s trajectory, and the type of equity you are being offered. When those pieces line up, equity can become a smart long term play. When they do not, choosing salary is not playing it safe. It is just choosing what supports your life today.
If you enjoyed this breakdown, consider exploring more workplace and finance insights on our blog.
