IBD: How much should you have saved by 30?
I went for a drink with my IBD associate and we started talking about our portfolios in todays market and she showed me she had saved almost a massive $700k and she’s only 26!! I was amazed and asked her how. Like for real?? That works out to be on avg $140k per year which just sounds ridiculous especially given your net income after tax.. rent.. living expenses etc..
She said nothing special – just consistent saving and investing her salary and bonuses over the past 5 years. I asked if she got any inheritance or lucky on any big investments and she said not really she mostly invested in index funds and that she made a large amount on Microsoft which was her only stock she invested in. I checked the chart it’s up like 200% in the past 5 years which can explain a lot.Then she made a joke how she never needs to spend any money as guys always pay for everything for her.. which I can sort of relate to as I’m a guy and I pay for everything when I go out on dates with girls too. Which does add up to a lot of money.
makes me think.. are female bankers secretly winning and absolutely rinsing us guys out here with them earning the big $income without needing to actually spend any of it.. Now every time I see a girl banker I’m assuming they’re all secret millionaires now
Surprisingly, she assumed I, as a VP aged 29 turning 30 in a few months, would have much more than her.. but I only have a little over $50k in savings despite having 4 years more experience than her
which makes me wonder.. Have I been terrible with my savings? Is it normal for associates to have $700k?? Who is the anomaly here.. me or her??
For those in high paid jobs like IBD, how much should you have saved up (total net worth so including investments etc.) by the time your 30. Which is typically 9 years of work, assuming you graduated at 21. I want to try fix my ways so I’m going to start saving aggressively now.
thank you!
lots of girls in NYC have their parents pay their rent so that could also be a factor in those savings lol. But if she got killer bonuses for 5 years and was up 100%+ on Microsoft then it could make sense if she doesn't really have many expenses maybe? But still has to be far outside of the norm, would say having half of that for her age would be very impressive. Come year end bonus this year I'll have a little over 400k saved, turning 26 next year..but been in TX my whole career so COL is like half of NYC so I'm lucky in that sense, and would not be close to that if I was in NY. But I will say 50k is pretty low for a VP, you not contributing anything to retirement and just running through your bonus every year??
Wow if you only have $50k saved across everything, then you really need to start taking a hard look at your budget ASAP. I think $700k saved at that age assuming she's not getting material help from anywhere is above average but nothing that strikes me as crazy.
Nah, it’s crazy. It’s about equal to total take-home pay (after taxes, before expenses) over the 5 years. Pretty hard to imagine…
$50k at age 30 in IB is pretty bad. You must have really mismanaged tbh. I don't even know how that's possible.
I saved $50k post-tax my first year out of school at a no-name boutique in Chicago that paid way under market.
yeah i think i've really mismanaged so hoping to really fix my ways for the future. $50k in year one is super impressive, for a bank that paid you below market. What level are you now? and how much have you saved in total ?
I'm an AS3 now. Have just under a mil saved / invested, but lost like 100k in the crypto game lmao so should have been right around a mil if I wasn't stupid. I feel like I'm pretty average in terms of spending / saving (overpay for rent, don't have a budget, don't know how to utilize CC benefits, bad at investing, etc.).
Did you have student loans or some other expense that you had to pay down? I fortunately graduated debt free so that helped a lot.
lol, I call BS - not that it's not possible but it's almost impossible investing into index funds (which by the way, is a great way to invest for most people, you just can't hit home runs) OR without being heavily subsidized in rent. When my bonus was $400k, $50k of it was net deferred and 50% went to tax. So I put $175k away. You do the math and tell me how someone has saved the equivalent of 4 VP bonuses when they went from analyst to associate.
I thought the same, especially how I'm a VP and only have about $50k saved up after taxes, rent, supporting family etc.. so I didn't think it was possible to have that much saved at 26. But she showed me the index fund she invested in which was a US equity one which is up around 70% cumulatively as of today since 5 years, so she's actually almost doubled her money just from that, then she said she put a decent amount into microsoft which returned her like 100-200% over the past years. But again, as you said these aren't home runs so still surprising she has so much. If she keeps this up, the trajectory of her hitting $1 million is probably only 1-2 years away. One thing to note I'm at a boutique so for analysts and associates it's 100% cash no deferrals.
If you don't mind me asking considering we're both VPs - I guess we're similar age unless you're junior VP - how much have you saved up in total? seems like you saving $175k in 1 year just from your bonus is multiples of my total savings over 9 years.. assuming you're single with no kids/major expenses? thanks
Got it; yeah hard to tell if it's possible without seeing how much she put away each year but anyway, sounds like far from a median case. I joined IB post-MBA and pretty sure I'm actually older than you (past 35 now) so separating what I've made from IB and the returns generated by just that portion is tough. Broadly, I've banked my entire bonus (minus maybe 5-10k) since senior associate so maybe $500k? Incl my 401k, my total NW is around a mill. I have to think that if I started banking as analyst (in the US, I moved here later), that would be a little higher but still a '1' handle. I don't have family, kids, etc and that's a massive expense so I wouldn't feel bad about your $50k. Your 'fixed' costs are higher but that just means you'll save more once your past that inflection point - just don't get canned or go to corp. dev. :)
You’re so right. She’s either lying about the funds or family is helping with rent or apartment. Nothing wrong with any of that but fronting as if that’s not the case instead of just not talking about personal finances is so annoying. For some reason though even Gen x and boomer parents feel its fine to go overboard for their little girls but cut their sons off or tell them “there’s no help you gotta make it in this world as a man!”…still 50k saved by 30 in ib is incredibly below average
Bruh, what she’s done is pretty solid, but $50k for you as a VP… cmon man.
I came out of undergrad with some student loans and negative net worth and hit $550k by 26 before going back to bschool.
Very very easy to do if you save your bonus and save a decent chunk of your salary. You must pay thru the nose in rent
$550k by 26? that's bullshit
You're right. Idk what I'm talking about. You should aim for $100k. Good luck with that :)
A VP with only $50K savings is crazy. Do you have any retirement accounts?
I'm an As1 (4 years in banking) with ~$400K NW (split 65/35 in equities and retirement). I wasn't very aggressive with investing in my equities over the past couple of years so they really haven't grown as much as my 401K which has ballooned through the pandemic.
Don't mean to pry but what do your expenses look like? Are you basically spending most of your annual bonus each year?
700k at 26 is very impressive, not the norm for anyone. But 50k as a VP at 30 is abysmal. My sister is a nurse and she had more than 50k saved after 3 years of working. To be honest anyone with an average corporate or finance job should have over 50k with 9 years of work experience, thats about 5k a year saved not counting market return, investments, etc. Unless you have like 3 kids and a wife (and even then) you really needa look at your finances. You’re in a very privileged position in a high paying field, you gotta take advantage of it. Goes to show it’s about how much you save not how much you make.
Unless you recently bought a property or something, $50k is very very low for a VP. I'm in Europe so not sure what living expenses etc. are like in the US. I made €160k my first year as an analyst (€85k base + €10k sign-on bonus + €65k bonus). Lost about 70k to the tax man. Left with €90k. Spend €1500 on rent a month, €500 on food and about €1000 on other stuff like clothes, experiences, drinks, gym etc. Ended up with €50-55k in savings. With that said, I am not living in a shoebox eating noodles but I do everything I want and buy what I want. Meanwhile, I don't live some baller life flying business class to the Maldives for my vacation, buying expensive watches or buying expensive alcohol for all my friends.
Exactly, and salaries are also a lot higher in US. OP should have at least 400k NW by now…
People Overcomplicate taxes and savings as though its a huge blackbox mystery, but it's actually pretty straightforward. Here's the math:
Assuming mommy and daddy paid for school, It's not unreasonable for her to have 700k saved.
Fwiw, I am the same age and in a low cost of living place and have about 500k saved. I also have had way less exposure to the S&P. If I did, it's not unreasonable to think I'd be at a mid-to high 600k number.
All that said, how much you should save, can be governed by 3 rules:
So, math for an analyst, Gross 200k, post 401k, 180k, post taxes, 126k, spend below 7.5k, bank the rest which is about 32k. This works out to the commonly advised live off base, bank your bonus. Also, just being honest, if you are in NYC or SF, it's unlikely you can save like having a similar job in a LCOL city. It's just not possible.
Solid analysis but I think the point still stands that this is pretty rare due to a few factors:
1. Assumes banking straight out of school. Although common, many bankers post associate level are laterals from other banks or industries.
2. Assumes VERY strong bonus history. Banking pays well but there are probably only a few groups/banks that pay consistently that high. No industry cyclicality baked in here and imo there should be.
3. Assumes no student loans. Sure, lots of bankers come from money and their parents have paid their way, but many don’t and graduate with debt. Time value of money is even worse if you are an MBA associate.
4. Assumes LCOL. As you mentioned, COL and taxes in NYC/SF/LA meaningfully eat into earnings.
5. Assumes girl. I’m not a redpill incel but dating/having a gf in a HCOL city is pretty damn expensive and I have yet to meet any guy whose significant other pulls any meaningful weight in regard to finances.
6. Assumes no major life purchases. i.e., house, car, wedding, major medical procedures, engagement ring, having a kid, or even taking a nice vacation here and there.
I cant really think of anything else right now, but I am sure there are other reasons. The point I am trying to make though is that yes, it is possible, but MANY things have to go right and you have to be extremely focused on saving money. I wouldn’t say this not at all realistic for most people on here.
I mean yeah, it is rare. That’s the point of all the disclaimers I made.
1) if mommy and daddy pay for school she could have 700k saved. Otherwise, it’s prob way lower.
2) assuming very generous compensation and she has one of the highest paying roles you can get
3) assuming she has low expenses
If we wanted to find what is a normal amount to be saved, it would obviously be a lot lower. My last paragraph literally gives the math for what’s more normal for someone more financially well off and considerate. Maxing 401k and saving 25% of post tax earnings is the way to being in a really good spot. Again, saving isn’t complex, people just get caught up in the living standards of people around them and are way too quick to increase spending. If you hold off life style increases and are able to get a banking job, tech job, or consulting job, it just isn’t hard to have a net worth in the millions by the time you are 35, even with loans. Use the math I had above and you can get why.
For the average American or someone not with those jobs, it’s obviously a different story and not plausible. Keep in mind as well, every 100k you save should be at least an additional ~5k in passive income. That starts to compound and make the whole thing easier.
The tax estimates here are completely understated
How can you argue tax estimates are understated when I literally give the federal rates and estimated state rates?
but also, 30% is easy math whole point of the calcs was a directional estimate.
She seems more normal than you in terms of savings by age.
From someone older....
Enjoy your life, saving 1 mill by 30 vs 200k by 30 isn't going to mean much. It's about longevity. You'll make up for the lost dollars later in your career.
Yours 20s come only once.... You just need one good bonus/one good year later on in life to make up for that 1 million.
You can definitely live an enjoyable life (cool trip, bars, restaurants, whatever it is you find enjoyable etc.) and still save a material amount of money by the time you're 30. Its not a this or that question. To each their own of course, but I'd argue that having a large nest egg sooner is much better as it can compound faster, can get you into a house faster (that at least for those that did so have received outsized gains - who knows if such trends will continue but regardless it benefited people that saved more at the time). Also, there is no guarantee of such financial success in ones career, certainly not predicable in your 20s. You can burn out, want to chart a different path, not make it up the ranks, etc.
I’m sorry but this just isn’t true. It’s not to say that having saved up $200K by 30 is a bad thing, but assuming 8% nominal returns (global stock market returns since 1921 or so) without ever adding another dollar to retirement again is $3M in 35 years (assuming you retire at 65). The same conditions, but you have $1M? Nearly $15M by 65. This means that assuming 3% inflation, you’ll have $1M by 65 in today’s dollars, rather than $5.5M - a wildly different standard of living assuming a 3-4% SWR. In order to reach about the same retirement as the person who starts with $1M who never invests again, the person with $200K would need to invest $50K every year. The importance starting to invest as early as possible is huge.
Yes thats assuming you can return 8 percent a year.
The human life expectancy for a top 1 percent earner (male) is 90 years old.
Most likely it will be 100 for males around our age.
Social security begins at 67 for those in 1960. It'll probably be around 73 for us.
We are going to be working much longer than we actually think. It's better to "enjoy the journey," rather than trying to retire as soon as possible.
I would bet most retirees in 2018/2019 have lost purchasing power due to inflation. The returns are just not keeping up. Healthcare costs are also absurd. So many retirees die with nothing or in debt due to medical bills.
While it's completely true that a single good bonus in your later years can be several junior years' worth of savings added up, you are forgetting:
(1) Time Value of Money
(2) You're an outlier. Most people in the industry won't / can't stay till your level of seniority
(3) Options that a nest egg, even a low 6 figure one can bring you. If it means that they can pursue a higher risk but higher reward opportunity, it can be game changing
Don't dissuade younger folks from saving
Not really unreasonable. Feels like some are struggling with the math and using comments like
- Parents paid for school: could’ve gone to target w financial aid
- top bonus: could’ve done well in school, got a job at top firm and got top bonus. Some top analyst and associate indeed are girls
- living expenses: people do get roommates. I did post MBA. Or might even be in relationship and share place
- food / eating out: as an analyst / associate don’t most stay in office and have all meals? Girls also generally eat and drink less when out or at least not trying to blow it
And that’s how you make and save money without trying to live in Dallas and eating ramen or sleeping in a car.
I also suggest watching Fair Play on Netflix tonight so you can stop putting down a girl for being high performing and making / saving money.
With the compensation this field provides, unless you have large student loans you are paying back, you should be able to easily max our your 401(k) every year, as well as max out your Roth IRA through a simple backdoor. I'm not in a HCOL city (i.e., not NYC nor SF), but I imagine with a VP salary, you should also be able to save at least a little extra each month, plus dump a bunch in at year end from your bonus. I'd recommend automating your savings as much as possible so you never see it in your checking account to begin with. For example, automate the retirement account savings each month. Then, if you know you net ~$12K per month after taxes and retirement contributions, and your expenses are ~$10K per month, set your accounts up so it automatically transfers $2K every month to your brokerage. That plus the retirement accounts would get you to $50K per year already, before any bonus contribution. Then, if you want to get more and more aggressive, see if you can increase the monthly amount more by cutting down some expenses once you get more used to your "new budget". I like to keep it super simple and just dump it all in a broad-based ETF like VTI and forget about it. If it makes sense for you, and you want to save aggressively as you mention, consider getting a roommate if you do not have one already.
Overall, $50k is a little light for someone in your shoes, but being open to the fact that you can/should be saving more is great self-awareness. You are in some prime earning and saving years, especially if you do not have kids, so you can make huge gains in just a few years time! It's hard not to do, but you will drive yourself crazy if you compare yourself to others. You never know what others' situations are (huge student loans vs. multi-million inheritance from parents, etc.) which can drastically change their ability to save. Just focus on continuing to enjoy yourself, while also prioritizing your future by increasing savings a little more each year
Curious to hear people’s take on the spend the paycheck, save the bonus mindset.
Personally, that’s how I have lived but read some comments recently that made me think otherwise. I’m still an analyst in a HCOL city so it’s not like there’s much leftover in the paycheck but I’ve developed a pretty solid budgeting system so if I wanted to, I’m sure I could bank some more.
Big proponent of not just saving your bonus and calling it a day. I think of it at less about the actual $ amount you're putting away from each paycheck because like you said it may not seem like a lot now, but moreso developing the habit and forcing yourself to save a bit more / live below your means for as long as possible, which I personally believe will pay dividends in the future.
The other thing I’ve been trying to figure out is if it makes a difference to contribute to 401k via paychecks or bonus. I’ve already maxed out for the year so currently trying to build an emergency fund. But once I’ve done that I need to figure out how to split it.
I feel like the most tax advantaged way is probably:
1. Contribute a certain portion via paychecks
2. Once bonus hits max out retirement accounts plus save some extra (like keeping 10% for a big purchase)
3. Remainder of the year send a portion to brokerage / build up some cash in HYS for one-off alternative opportunities
you should really max your 401k every year you are in IBD, and also save 100% of your bonus, at a minimum. if you make associate/VP in your 20s without MBA, no real reason you shouldn't be able to save ~50% of the after-tax pay increase too.
maxing 401k alone for 8 years at 8% return would be ~240k, so yes, 50k is definitely behind
For me I have $150k in assets with 4 years of work and 2 years MBA. saving ~60k a year on 230k in NYC. have 150k MBA loans as well so I am at 0 net, but will still hit 50k networth by 30
I’m working at an EB and currently live with 3 roommates and pay $1.8k/month for housing. I cook on most weekends and wfh days. Spend about 300 per month on lunch in office. I max out my 401k and invest every check into index funds.
I think this is certainly possible. It requires discipline and frugality. Many people like to take expensive trips, pay for expensive rental units and frequently dine out and drink on weekends which may reduce savings.
Please open up the same thread for London savings
Would be jokes indeed
It’s not normal, 1). 2020-2021 had really top notch bonuses and 2). she likely isn’t paying for student loans amort/interest, so that’s huge from a compounding and savings context
Damn I have like just 1 month expenses in emergency money as a first year analyst currently. Graduated with $20k in student loans, and am aggressively paying it off hoping to be done by the time I hit associate in IB or wherever. Have been living too extravagantly and so basically barely maintaining my 1 month fund. Making more wouldn't help unless I can fundamentally change my habits to avoid lifestyle creep.
You completely mismanaged.
I am Asso 1 (Asso 2 in January) in London and with a lower salary I have saved $150-200k.
I still travelled a lot but basically spent my salary, saved most of my bonus. The difference with my colleagues that have no savings is that I don’t spend £500 on a night out every single weekend.
Rerum distinctio hic suscipit perferendis repellendus sed. Molestias et repudiandae quis dicta. Occaecati eius necessitatibus laudantium nesciunt incidunt amet.
Id libero incidunt deleniti quas sit ea. Ut corporis temporibus blanditiis aut dolore. Maxime odio nisi ab dolor sunt.
Qui qui consectetur perferendis veniam ratione. Praesentium dignissimos voluptas unde et ab sed. Saepe sunt nesciunt et. Aliquid repudiandae nihil consectetur commodi iure aut nisi. Tempora nesciunt aperiam voluptatem quia dignissimos quam. Eligendi et harum neque quam.
Fugit quod repellat adipisci est vel assumenda est. Aliquam sit eligendi inventore. Quis quibusdam provident enim voluptas repellendus assumenda.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Autem reiciendis reprehenderit vel placeat. Quibusdam nulla sunt ut inventore quam. Eum recusandae alias sint quis ea molestiae occaecati. Facere praesentium exercitationem incidunt animi molestiae odit nihil.
Corporis error odio nihil facilis perferendis voluptatibus aut minus. Eveniet voluptatem qui velit ad ratione voluptatem. Est qui dolorum et nihil voluptate temporibus.
Aut ullam deserunt in ipsa. Corrupti neque ut placeat. Ut adipisci mollitia voluptatibus quidem rerum quia et. Qui culpa sed sint aut. Aut debitis doloribus ut dolor cum vitae eum.
Quia ex non sunt animi ut quo. Nobis ab distinctio odio eveniet est.
Omnis eos sed deleniti dicta. Assumenda sed non excepturi ut. Sit amet ut quae porro ex totam et. Velit fuga repellendus asperiores quia omnis omnis.
Minus necessitatibus possimus animi ex. Et illum dolor voluptas corrupti ratione est. Minima natus accusantium veniam explicabo.