Transitioning to a High Salary Lifestyle: How to Prepare
I am curious to know how to prepare for the high salary lifestyle that is typical in IBD. Let's say you are starting a FT Analyst gig, and you would like to optimize the amount of money you keep in terms of taxes.
Can someone provide some useful information on paying taxes? As students, many of us have not had to deal with this in the past and don't have personal accountants yet.
Obviously, we would all like to minimize the amount of taxes we are obligated to pay. Especially interested for SA gigs as well.
Lastly, I am interested in different ways of investing your money from your salary in IBD. Think of a scenario where one is not paying rent, school loans, or any other high expenses.
Looks like a freshie
MotionToBanAllFreshmen
Cayman Islands
Well, as far as paying taxes goes, if you are single and only really have one source of income (your job) it is pretty straightforward. I'd still recommend getting an accountant and just have them deal with it, I know the firm I work for actually reimburses for tax preparation so take advantage of that. Besides, It will really just depress you how much you pay in taxes and if you are a trader at all inputting every trade with cost basis etc is just annoying.
As far as transitioning to the lifestyle, you really need to re-frame the question you asked. It isn't as if suddenly you are going to have gobs of expendable income with the time requisite to enjoy it; it will end up being quite the opposite. Keep your head level and understand that you are fortunate to have worked hard and gotten the opportunity and don't blow it.
Investing is the same as it is normally, except some places and situations you can't trade for your own account or you have to clear everything through compliance first. Easy way if you don't want to deal with it is just buy a bunch of ETF's and mutual funds and call it a day.
Transitioning to a high salary lifestyle is easy, much easier than transitioning to a low salary lifestyle. You realize they will withhold taxes from your paycheck, right?
"Lastly, I am interested in different ways of investing your money from your salary in IBD. Think of a scenario where one is not paying rent, school loans, or any other high expenses." -- If you think student loans are expensive, wait until you have kids/mortgage. Your expenses will increase significantly over time, not decrease.
"Can someone provide some useful information on paying taxes?" -- Yes. You will be paying a lot of them and you can't avoid them.
Where are you coming up with these ideas?
turbotax
Bro it's your FAIR SHARE. You don't want to minimize your taxes, you want to MAXIMIZE them, thereby giving you the FAIREST share!!!!! How is Tyresha supposed to feed her twelve mouths? How is Bubba supposed to afford his raised F-150?
God, you are so selfish.
Really? You need an accountant to do taxes?
this board has really gone into the toilet
Just remember, you should only ever RENT jets, yachts, and women
no money, mo' problems.
I can't believe your getting ridiculed for asking a perfectly honest question.
My advice: - Don't start living large because your money will NOT go as far as you think it will. 70k sounds like a ton of money to a student but forget about buying bottles at the club every weekend or flying to vegas once a month.
-In order to minimimize taxes I would advise you to max out your 401k contributions each and every year. The limit is 17,500 for 2013. If you can sock away even extra open a Roth IRA. You can put in 5,500 thi year. Your student loan interest may or may not be tax deductable depending on your AGI. I can't remember the limits.
My advice in the scenario you described in the OP (no studnet loans, rent, or high expenses):
Max your 401k from your regular base salary, max a Roth IRA with your bonus, Set some money aside in a taxable account for a future home, car, or grad school. Get a freakin apartment if your planning to live with your family while being employed full-time. Avoid racking up consumer debt. Build out a professional wardrobe over your first 6-12 months on the job. Enjoy the rest.
This is why
It's not really a "lifestyle" that you have to go out of your way to prepare for. It's basic personal finance
I would disagree with this. 401(k)s and IRAs are products of a time when people expected to work in the same career field and possibly at the same company for years and then retire. Today you're likely going to have to reinvent yourself several times over the course of your career, so having the liquidity to do so effectively is very important. Plus the max amount you can contribute to a 401(k) is small enough that it is more of a pain in the ass than anything, and once you change jobs every few years (which is what happens in finance), you are going to be stuck with all these shitty 401(k)s until you are too old to even care anymore.
This is sadly pretty true... Changing from job to job with a tiny 401k is an awful experience.
take a Personal Finance Course. It was really helpful to find out about saving options and contributions to retirement accounts. It taught me also how to prepare my tax returns. Get an account with ETRADE or other cheap online brokerage and invest first in mutual funds if you have no idea about stock investing.
My reaction...
not sure if srs. Also, if you work in finance and you cannot balance a budge you are a potato! srs
First, start coming to grips with the fact that you will be paying an astounding amount of taxes, and as a W-2 wage slave, there are limited options for minimizing your burden. Nevermind the endless drivel about "working families," earning income by laboring for someone else is Uncle Sam's least desired form of income, so it gets taxed - A LOT.
That said, I can think of two things you can do to keep a little more cash in your pockets. The first is pretty easy, and is more of a timing hack than anything. Here's how it works:
The basic goal here is to pay the bulk of your withholding taxes at the end of the year, thereby maximizing your cash flow throughout the year. At the beginning of the year, figure out roughly how much in taxes you are going to owe for the entire upcoming year. Once you have this number, set your withholding allowances such that you don't pay any taxes other than FICA and medicare. 99 for federal gets this done. State varies, so you might have to play with this. In CA it's 14. The gnomes in payroll may raise some eyebrows at this, but pay them no mind - your taxes are your business and what you're doing is perfectly legit (if you follow the rest of the plan). Assuming you're a full time analyst, from here you have two alternatives: (i) pay your entire tax burden from your bonus in June / July and then pay no tax from your regular paychecks the rest of the year, or (ii) try to manage your bonus taxes so that you pay some but not all of your tax from your bonus, then switch your regular withholding to 0 allowances towards year end (maybe start November 1st or something) to hit your total number. In my experience, "(i)" is easier, but it's up to you. Just don't fall asleep at the wheel and end up at December 15 still rocking 99 allowances and behind on your withholding.
Two quick side notes re: the above strategy. First, if you are a summer analyst, just use 99 allowances all the way through - signing bonus, regular salary, the whole nine. You are only going to make 10 - 15K for the summer and if that's your only income for the year, the chances of you owing any taxes come April 15th are pretty slim. Enjoy your time below the poverty line.
Second, if you are one of the lucky people who gets paid a bonus in December, you've hit the jackpot. Keep the 99 allowances going all year long and just pay all your taxes from your bonus.
The second strategy is more involved, may not be worth it until you are clearing $200K or so, and requires an accountant to do things right. Think of something you regularly do (or could start regularly doing) that could be construed as a "business." Then, with the help of an accountant, form a business entity (probably will be a partnership). Once you have this set-up, start running as many of your general expenses through this "business" as you legitimately can (e.g. a portion of your rent for "office space," food, entertainment, etc.). Again, this probably isn't worth it as an analyst, but if you're dead set on pulling out all the stops to minimize taxes, you can try it.
I'm fairly certain the government can punish you for underwithholding in this situation.
perfect time for this thread....subs
In all seriousness, I feel that you will save the most money by finding a good deal on an apartment.
There is such a thing as a Roth 401k, although not every employer has it. That's the ideal in my book, especially if the company matches. When you leave that firm you can roll it into a Roth IRA.
That's true, but the majority of the banks don't offer Roth 401ks, in my experience. Matching into a standard 401k is obviously better than contributing to a Roth on your own.
"The second strategy is more involved, may not be worth it until you are clearing $200K or so, and requires an accountant to do things right. Think of something you regularly do (or could start regularly doing) that could be construed as a "business." Then, with the help of an accountant, form a business entity (probably will be a partnership). Once you have this set-up, start running as many of your general expenses through this "business" as you legitimately can (e.g. a portion of your rent for "office space," food, entertainment, etc.). Again, this probably isn't worth it as an analyst, but if you're dead set on pulling out all the stops to minimize taxes, you can try it. "
Are you not blocked from taking another job while being hired by a bb or top boutique or F500, let alone being the director of another company?
xoxo
posts like this make me wish i never started working in finance
How to prepare:
1) Get rid of all your "shitty" friends (people that do not have a high level of income like yourself) 2) Join the Republican Party and buy some a-hole t-shirts from the tea party 3) Get the new "Bottle Service" card from American Express 4) Take your own poop and wipe it under your nose so that it is that much easier to stick your nose up at people 5) Get a "Salvatore Ferragamo" tramp stamp tattoo
Oh, and in terms of taxes. Just don't pay them. I heard Wesley Snipes did that and he is the man.
You should probably get a circumcision in preparation for your high-paying lifestyle.
Step 1: Buy gold bars
Step 2: Bury gold bars in backyard
Step 3: Wait 20 years
Step 4: Profit????
You better get prepared for all the attention and transformational experience you are in for... It's going to be UN REAL!
xoxo
Speaking from experience ???????????????????????
xo
ttyl pumpkin!
xoxo
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