Poor with the shot of making it huge VS. 500k-1mm slaving every year until 50?

I’ve realized that we have one life. And coming from an upper middle class family, I will always have a safety net and have something to fall back on (parents fine with me moving back in at any point).

I’ve in banking for a few years now, and done the whole $150k, $180k, $250k a year thing for the last 3 years (analyst, analyst, associate). Despite this, I have minimal savings, no time/energy to invest/side projects/personal, and grind my ass off for each and every $ during all hours of the day. I am constantly busy – but what am I actually achieving? More importantly, what am I building for future myself? For example, I have no time/energy to buy/manage income-producing assets like a few small apartment buildings.

I’m still relatively young – 26. Given the marginal impact that IB has had on my life – by that I mean it’s not materially better than my upper-middle class upbringing, I’ve decided that the only point of this life is to go huge (wealth from personal equity stakes in whatever investment excites you (tech,real estate, whatever).

What do you guys think about grinding out your $1mm/year in the top 1% vs. sacrificing such a large salary to focus all time/energy on shooting for the top .01% via entrepreneurship etc.?

 

It 100% depends on you. I know people who come into banking and leave after only a year because they hate it. I also know people who have been in banking 20+ years and love every minute of it.

I suggest you watch Happy (came out in 2011, should still be on Netflix), but basically, once you cross $75,000 or so in annual salary, the marginal happiness generated from each additional dollar earned is close to zero. If you look at the "war" going on between tech and IB for top talent, IB is losing, and it's only going to get worse because all that IB has to offer is money. At the end of the day, many people, especially those our age, are just not that concerned with how much money they earn in relation to their peers, especially if the only way to make six figures is to slave away for 80 hours a week.

I would seriously take some time - not the ten minutes you spend in the subway each morning, but real time - and think about what you like to do and what parts of IB (if any) you enjoy. Good luck.

 

They might not care how much money they make now, but they will in the future. Soon they will not be able to live in the area they want and may lose social status. At that point, they will regret not putting their head down.

As I get older, I am finding the more things stay the same. The people who take their peddle off the gas - be it in 5th grade or at 25 - lose. It is worse early due to compounding, but only when you (are able to) retire can you actually do this. Anything else has to be seen as consumption in lieu of investment.

 

I'm about halfway through Happy right now (it is indeed still on Netflix). Thanks for the rec. Pretty good documentary so far! Definitely not a high budget film by any stretch, but it has a lot of interesting and important stuff in it.

Frankly, I wish we'd talk about this stuff more on WSO. Concepts like Gross National Happiness are fascinating to me, I'd hope I'm not alone in this regard.

"A modest man, with much to be modest about"
 
JYF:

I'm about halfway through Happy right now (it is indeed still on Netflix). Thanks for the rec. Pretty good documentary so far! Definitely not a high budget film by any stretch, but it has a lot of interesting and important stuff in it.

Frankly, I wish we'd talk about this stuff more on WSO. Concepts like Gross National Happiness are fascinating to me, I'd hope I'm not alone in this regard.

Well....most people on here are still in college and going through the "I need to make as much money as humanly possible" phase :)

 
Best Response

If you're the sort of person who would ask us this question, you're not the sort of person to reach that 0.01%.

Those who can, do. Those who can't, post threads about how to do it on WSO.
 
NESCAC:

How exactly do you have "minimal savings" from working in IBD?

This is exactly what I was going to ask. Idk about others, but as a single male if I make 75-150k AFTER taxes, there should be no issue with living on 60k of that and saving the remainder.

Array
 
NESCAC:

How exactly do you have "minimal savings" from working in IBD?

This.

The lack of savings while making a quarter of a million dollars a year just doesn't compute.

Nearly ever success story I know of have involved my friends making sacrifices AND having some form of bankroll (whether through savings or through parents). If you live a lifestyle such that you can't save anything on a $250k a year salary, you have to ask if you're ready for the sacrifices of the early years of a startup.

Also -- are you only looking the entrepreneurship route for the money? All of my friends who have been successful going this route did so because the product/service they created was something they were passionate about. The money simply followed.

Director of Finance and Corporate Development: 2020 - Present Manager of FP&A and Corporate Development: 2019 - 2020 Corporate Finance, Strategy and Development: 2011 - 2019 "An investment in knowledge pays the best interest." - Benjamin Franklin
 

A) How do you have minimal savings? I'm at a comparable point, and though I've had a little higher comp, I have considerable savings. Make sure you don't golden handcuff yourself to the job.

B) Try getting to a million a year first. Once you realize how hard that is, you'll realize how foolish it is to leave a well paying job because you think you can do multiples better than that as an entrepreneur.

And tbh if youre having so many problems at 250k a year you need to analyze your spending habits and job efficiency.

 
I suggest you watch Happy (came out in 2011, should still be on Netflix), but basically, once you cross $75,000 or so in annual salary, the marginal happiness generated from each additional dollar earned is close to zero

Clearly not documented in NYC.

Despite this, I have minimal savings, no time/energy to invest/side projects/personal, and grind my ass off for each and every $ during all hours of the day. I am constantly busy - but what am I actually achieving? More importantly, what am I building for future myself? For example, I have no time/energy to buy/manage income-producing assets like a few small apartment buildings.

I think you just answered your own question.

 

Headline - Multi-millionaire goes bankrupt

Before we touch on whether you should shoot for the moon or grind it out, lets talk about you, your spending, and lack of savings. If you don't address this, largest vast of money can disappear and you could still make millions and retire broke.

Even in NYC, average FAMILY income is ~$55k/year. So even your 1st year out you made 3x mean family income. No savings... Young and a bit crazy. Let me suggest 580k in 3 years, you budgeting skills is extremely poor. Take some time to do some financial planning for yourself (you have have looked at your firms or other firms financial plans so this shouldn't be impossible task). I'm not saying you should look to live like a family on $55k income, but perhaps you could have squeezed out 1/3 or at least 1/4 of your income as pure savings (call it early retirement savings).

Option A - Grind it out. You saving 25% of your income today at 250k/yr and start to increase that savings to 33% as you get to 1mm/yr. Meaning by then your income goes to ~1/3 in taxes, 1/3 savings, 1/3 spending. So you are essentially saving 1 years worth of spending a year... That savings invested of course. So when you are 36, even with salary and lifestyle cost growth, you hopefully have 10+ years of early retirement savings (plus your maxed out 401k/pension). By the time you are 45 you may easily be able to retire to some tropical island with your honey and drink coconuts all day long.

Option B - Entrepreneurship -- High risk, High reward. High risk is great uncertainty financially and high likelihood of failure (zero at the end of the day). So good chance you wake up in your 30's realizing its a dud and you have no savings (at least you can say its because you went after something, not because you spend millions in your lifestyle). Hopefully even in this case you can find a silverlining, you really went had this brilliant idea (your baby) that you worked on developing. A lifetime of stories and experiences you can carry with you. Be prepared for this outcome as it is very real.

If you make it, it was with a lot of hard work, great deal of stress at times of uncertainty, you may be a $bn-aire... Great!!! (much less than 0.01%).

The more likely semi-success story is you get bought out for $10mm, your 7-15yrs of your life and you are locked into a 5-10 year non-compete agreement. Was it worth it? If this is your baby, it was worth every ounce of blood and sweat.

If you are shooting for the money to get rich, maybe you should think more on it. If you have a really great idea you want to work on, it isn't about the money. Money is icing on the cake.

 

How can you assume success if you go toward an entrepreneurially route? You seem to have some preconceived notion that if you really give it your all you will become a billionaire. If you really could do it you would just go for it not ask others for advice considering how large of a economic disparity in the routes you propose. If you like finance and IBD stay, otherwise test the waters.

You're not really a born and bred, traditional aristocrat if you work hard enough to get into Harvard.- Prospie
 

Everyone needs to find the path that fits their style and what they want out of life.

Personally I have found that working in finance and making sure I save money to put into generating assets works for me. Therefore every year I make sure to put $X amount into a startup/$X amount in stocks etc etc. Obviously im not IBD so have the luxury of a bit more time, but my idea is that in 10 years I should have a solid portfolio of assets. And this might sound crazy but I almost prefer slightly illiquid assets, because they make you feel poorer which forces you to live within your means.

This might change if i get an idea or start working on something that i 100% believe in, but I wouldnt go chasing entrepreneurship for the sake of it, I dont think it works that way.

Also how do you clear almost $600k by 26 and only have minimal savings?

 
derivstrading:

Everyone needs to find the path that fits their style and what they want out of life.

Personally I have found that working in finance and making sure I save money to put into generating assets works for me. Therefore every year I make sure to put $X amount into a startup/$X amount in stocks etc etc. Obviously im not IBD so have the luxury of a bit more time, but my idea is that in 10 years I should have a solid portfolio of assets. And this might sound crazy but I almost prefer slightly illiquid assets, because they make you feel poorer which forces you to live within your means.

This might change if i get an idea or start working on something that i 100% believe in, but I wouldnt go chasing entrepreneurship for the sake of it, I dont think it works that way.

Also how do you clear almost $600k by 26 and only have minimal savings?

Basically this. Two points. You seem to be framing the discussion in a way that polarizes your options, without considering that there is a middle ground. In addition, you seem dissatisfied with your current lifestyle more than your current pay, yet you are looking for pay to solve your lifestyle problems.

For the first, you can do what the above poster suggests. The options are not limited to working like an animal and making a million dollars (with better downside protection) versus working like an animal for a 0/1 proposition (ending up broke or a billionaire). You can get a good paying job where you can put away money and invest in assets (e.g. you make $150k in a lower cost of living city and invest in apartment complexes). Another option is to save over the course of several years and then buy a decently sized established business. This has the benefit of reducing your risk of a "start up", allowing you to benefit from considerable financial upsides of equity ownership in a business, and allowing for a better lifestyle that is at your direction. Look into SBA loan programs that would allow you to purchase businesses for a small down payment (particularly when coupled with seller financing). With 15% seller financing, you can put down 10% on a business and have the SBA guarantee it. Check out the below small business valuation calculator to determine approximately how much you might have to pay.

Second, getting a slower paced job that still pays well will give you more time, which you seem to be concerned with. Coupled with the first point, you should be able to achieve your goal of living a comfortable life and creating wealth.

Also, as mentioned above, you need to fix your savings/spending habits pure and simple.

http://www.hadleycapital.com/working-with-us/business-valuation-calcula…

 

There are some many factors that come into play to make an educated decision about this, that it's really difficult to give a clear answer.

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. See my Blog & AMA
 

"I have minimal savings." Look, faking it 'til you make it has a high cash burn rate. Summer houses, first big boy watch, car, parking garage payments, charity events, ski trips, dinners at Raoul's (crossing your fingers they place you next to the fish tank)... it adds up.

Then again, all of those things should have brought you happiness so I'm having trouble reconciling that with your apparent displeasure. You pose a real headscratcher.

 

I'm 24 and in a similar position, so I feel like I can weigh in pretty fairly.

The minimal savings line really got me. Kind of shows your lack of awareness to be honest. I'm in SF, an arguably more expensive city than NY now, and am associate at a small PE firm. Not including my bonus I make low 6 figures and I feel like I live like a king off of that salary. I live in a great place, have a car, buy myself nice things, go out to dinner a few times a week, spend money on my girlfriend, and still easy save 25% of my salary. I could be saving more if I didn't spend on small business ventures, micro VC etc. Point being, you must really be living outside of your means to not be saving money while making 250k a year. As in you're the guy who goes out multiple times a week, orders bottle service, lives in a 5k a month apartment, only takes black cars places, flies first class, etc. Feel free to correct me if I'm wrong.

The concept that you have to go big or go home is stupid and will most likely bankrupt you. The best way to accumulate wealth is slow and steady. Honestly I wouldn't want to be in either category you mentioned. I wouldn't want to be a life-time banker and I also wouldn't want to be an entrepreneur always grinding in hopes of striking gold.

I'd like to find a job that pays me well and gives me a pretty good quality of life. If I can find a job that pays a few hundred grand, but gives me time outside of work to work on other business ventures/hobbies that's my goal.

 

If you've ever read anything by adam grant, he talks about how it's an illusion that entrepreneurs one day decide to quit their job and start a company. Most are conservative and methodical in their approach and virtually certain that their company is going to sustain them before they quit their jobs. Steve wozniak worked at hp well after him and steve started apple. Zuck and Evan Speigel hedged their bets and stayed in college until their companies took off. Make it work.

If you actually want to make the jump, please DM me. I work in NYC full time, am am trying to get multiple companies off the ground.

“Failure after long perseverance is much grander than never to have a striving good enough to be called a failure.” – George Eliot

"To live is the rarest thing in the world. Most people exist, that is all." Oscar Wilde

 
Wallstreetmotivation:

If you've ever read anything by adam grant, he talks about how it's an illusion that entrepreneurs one day decide to quit their job and start a company. Most are conservative and methodical in their approach and virtually certain that their company is going to sustain them before they quit their jobs. Steve wozniak worked at hp well after him and steve started apple. Zuck and Evan Speigel hedged their bets and stayed in college until their companies took off.

For the record, the book is "Originals" and it is amazing

Commercial Real Estate Developer
 

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