How can HF analysts afford families (NYC)?
Looking at the PE thread on expenses and lifestyle it seems almost impossible to plan a family in NYC working at a HF unless you are a top PM. If you are a 30+ year analyst at an MM/SM making mid high 6 figures a year (aka not at tiger/lone pine) with insane volatility of earnings (zero or nominal bonus years) and the chances of getting canned every year, fund shutting down how do you get comfortable with committing to kids/tuition/mortgage given the high cost of living? Vs a PE/IB VP making similar comp with more visibility in career trajectory? Even if I made a lot 1 year (say $2-3mm) that could go to zero the next and you aren’t building a mortgage/home equity on 1 year peak earnings. How do you commit to years of private tuition if you might have to live off savings for 1-2 years if your team is laid off?
do people just defer families in the industry or find a partner with a steady job (doctor Corp dev etc) while they swing for the fences? Or they only do if after getting a massive guarantee/bonus ($5-10 mm) that de risks their career after?
(Asking because I’m one of these analysts unclear if he think about starting a family vs move out of NYC and find a job that is stable with reasonable COL and no need for private school tuition)
In my experience, I think >50% of analysts in the industry come from minimally wealthy families - in that parents funded their uni tuition, apartment in Manhattan, and/or more. But yeah, for the rest of us, you def won't have much luxury if you want a family. Only going to live without thinking too much about money by the late-30s to mid-40s, if you're not fired. And yep, PE is a "better" career path in this sense given the higher visibility. IMO.
My solution has been essentially to just live off my base. My wife works too so between us we have a decent enough income stream that can cover our expenses while our nest egg compounds.
Others i work with are more aggressive but I essentially am always assuming my HF career could end next year. Once those fixed expenses get ratcheted up (Mortgage + Kids/Private School) its hard to go back. you dont want to be in a situation where you have to move or take your kids out of school if you get fired.
Even if HFs go away next year i can probably get a corporate job in the $200-300k range + my wifes salary so we live like that has already happened. One day we will spend more money once we have a lot more liquid $
You are basically saying you will never choose to have a spouse/family unless you can achieve a certain standard of living. Very typical thinking when you have less than 5 yoe as you assume wife/kids will adapt and fit to your lifestyle. As you get older you will see there is more than 1 permutation to life. Some people commute, some live in a smaller place, some send their kids to good public schools and have tutors to do the rest. So on…
Also not sure one should panic on how typical PE vp lives their life. You are talking about people who have minimal control on their schedule/lifestyle for the first 8-10 years after graduating.
Hardest part is finding a good spouse who will always support you and raising your kids your way. Beyond that over time will figure it all out.
Next thread: How Can Billionaires Afford Families (NYC)?
What you're describing is an upper class lifestyle in one of the highest COL areas of the world. As a relatively junior investment professional that's not a guarantee in this industry, or even in PE. If you flame out as an Associate/SA and don't make partner in PE the 4br co-op on Park Ave and two tuitions at Dalton won't be paid for either
Am thoroughly enjoying these kinds of threads.
The cat is finally being let out of the bag… as others have alluded to, >50% of the guys that are “killing it” i.e. living in nyc, have kids etc have family backing some aspect of it.
I can think of two guys genuinely killing it in my network (3mm+ bonuses in 2021) that actually fund their own lifestyles completely (and maybe take of a poor family member) along with family. One guy is still renting and refuses to buy for the reasons already outlined. The other guy is about to buy but mostly because his spouse has serious family money to fall back on.
The rest of us are mere mortals, intellectually curious and semi prestige whores that probably range on 350-850k depending on the year (200-250k base) and live “regular” upper middle class lifestyle (
A reasonable question. My own experience:
I started a family with pretty close to zero net worth (b school loans) and moved to the buy side shortly thereafter. Oh and my spouse makes like zero money but also works full time, quite the combination given incremental childcare/school costs.
On top of that, the first fund I moved to imploded - it didn't shut down, and I wasn't let go, but came close. But despite all that I am incredibly thankful I made my way to a L/S seat because of what happened since then. The 2-3 years of training at that first fund was enough for me to figure out how to make money in my space and find a senior analyst gig where I'd get a % of P&L payout. That ended up being my ticket out of having economic concerns because of some strong performance in the years since.
In terms of making it work in NYC vs elsewhere, it's pretty reasonable to live in the city with kids on say a mid-6 figure average income. But obviously we weren't plunking down $50-60k/yr for each kid for private school tuition in my first few years in the HF world, and even now that we can afford it we're not rushing out to do it. We actually really like the school our older kid's in and it's free, so our younger one will go there too. NYC works fine for all sorts of budgets, you just have to be flexible. Bottom line is you just manage your finances conservatively as you build up your personal balance sheet to the point where the income your assets are throwing off hits exit velocity.
Anyway if you are a hedge fund analyst you probably already know all this and just wanted people to tell you you're not crazy for thinking this. You're not crazy, high volatility income requires conservative financial management.
Isn't that the appeal of the HF world? That massive upside, and eat what you kill lifestyle?
As somebody in roughly this situation for most of my 30s:
1) don't live in NYC. Move out to a nice suburb. Savings are twofold: lower housing costs and you can send your kids to public school. Best if your fund is located out there too
2) have a spouse with a stable income. Mine makes 225 a year or so, enough to fund most of our lifestyle
3) don't live a baller lifestyle - I fly coach, live in a house that's in the 1-2MM range, kids in public school. From the outside, I live the lifestyle of a moderately successful doctor or lawyer while making 3X as much. This way the savings accumulate faster and you wouldn't have to cut back if you were forced to take a big pay cut