An 1 Bonus - what to do?
so, after a year of grind and 100 hour weeks i ended up getting a top bucket bonus, which after tax comes up to around $40k (i cried a little but oh well). so what now? what should i do with the money? it’s not really enough to invest into real estate or a business but too much to be sitting around too. i haven’t spoiled myself with anything yet - so might spend a thousand or two on some stupid stuff to numb the existential dread. but other than that, what should i do with this extra bit of cash
What is your current financial situation?
What is your NW and what are your financial goals? What debt do you have (if any)?
Take like $5-7k of it and do something nice for yourself. Trip to Europe, long weekend with your parents or GF with a nice dinner, nice watch you've always wanted, really whatever. I would definitely take some sort of vacation with the money as material things won't last long.
The rest I would just invest, put it into the SPY or whatever investment of your choice. Build yourself a nice nest egg
How much was pre-tax?
Around 80K, assuming no contributions to retirement accounts, if I had to guess.
I wonder how much we get back with the tax refund
how much was the bonus taxed initially?
About 45%
General rule of thumb is usually around 65-80%. So if you get a 100k bonus, you would probably get 50k upfront assuming you are in NYC and the remaining 15-30 (probably closer to 15) back in your refund.
Or adjust your withholdings and yes it will be taxed but instead of a refund you are getting it smoothed out over your bi weekly
at barclays so will cut all your assumptions in half, but thanks very helpful!
1 bender + 1 vacation or expensive purchase. Bank the rest
Definitely don’t invest all of it. It’s silly to scrimp and save when you’ll be making 3-10x in the not so distant future. I would say take $10-15k and spend it on a few fun things throughout the year.
Seriously, when you’re an associate making $300-$500k (depending on seniority and whether you leave for PE), you’ll feel stupid for trying to save that marginal $5-10k when you were young and could do anything.
By the time you’re making $500k+, many of your boys will be married, you’ll probably be in a serious relationship yourself, and life will have settled down a bit. Spend the money while you’re young and have friends who want to party.
Also don’t forego fun experiences to buy material things like a watch or car
Or you can throw the $15K in TQQQ and have $80k in 3 years
TQQQ had a phenomenal few years, but you cant expect that to continue in the near future. Beta decay is gonna murder returns with higher volatility and a sideways trading for the next year or two. TQQQ only works in a bull market, not in a stagnant or bear market. Right now, those probabilities are not equally weighted.
Yeah man, like I said. This is exactly what I did and I’m advising you do differently. $80k just isn’t that much once you’re making $500k/year and then $1mm++ shortly thereafter. And yeah, assuming your investments 5.3x every three years is a bit silly.
Its ironic because our college finance classes teach us Time Value of Money, how important it is to save and invest, compounding interest, etc etc. But if you map out the future net worth of an investment banker, the money generated in years 1-4 is practically meaningless even with compound interest.
You can figure out what IBers at all levels make through reading this forum. So put those numbers into a model, assume a post-tax savings rate for each year, an investment growth rate that you think is reasonable, and then calculate your net worth at 45 or 55 or whatever age you want. Now go back and drop your savings rate at ages 22-25 down to zero… what happened to your future net worth? It‘a nothing more than a blip on the radar. Going from $15mm net worth at 45 to $14.2mm? Do you really care about that?
I've been fascinated by the FIRE movement, and how it has engrained this saving/investing mentality in a lot of people. There are obviously a lot of benefits to start saving and investing early, but people somehow completely disregard the joy of being young and free. You're in a profession that has exponential earnings potential, and like others have mentioned, you will not feel the difference once you make 300-500k a year.
For me, I'd say go to town with half of that bonus. Firstly, get things that make your life easier, if you do not already have it, such as hiring a maid or subscribe to a home delivery cleaning service. Secondly, treat yourself to something you wouldn't normally do, bring a girl to some nice tropical place, take a few weeks off, dine at the restaurants you've always wanted to go to, or go skiing with your mates in Canada. We are not all Homo Economicus', and life starts before you're retired with a 10MUSD nest egg.
Not that footballers are the most financially sensible people, but there is something to what George Best said;
I was thinking about that as well and one of the reasons I think the FIRE movement is so popular is because it gives people a purpose in life and something to work towards.
When you only get like 10K, there's not that much you can do.
With that $40k I'd take $5-7k to spoil myself, and then I'd split the rest between savings and investments. It's always important to have an emergency fund that could help you get through hard times. Congrats on the bonus and enjoy it!
Whatever you decide, do the math on it. Take the amount you're considering spending, say 10k, and stick it in a compound interest calculator and see what happens after 30 years. Make sure you take inflation off the annual return and then cap gains tax from the final amount. So you'll have it in today's dollars in 30 years - is that number worth you spending now or is it meaningful enough to save? No right answer, just be aware of the facts before you decide.
XOM, CVX, VZ, T…better than a bank savings account
My bank savings account didn't spend $50B on a questionable spectrum investment last year, and it didn't lose 15% of its value this year.
Dolor praesentium qui ea at et. Ut porro numquam et et. Perferendis quo dolor rem velit odit. Ratione aut in sit quo. Atque exercitationem assumenda mollitia id rerum qui sapiente facere. Ullam molestiae delectus rerum ut reiciendis possimus ea placeat.
Necessitatibus quae consequatur pariatur doloremque repudiandae sunt. Aliquam architecto eius velit beatae. Qui exercitationem at quam quidem amet. Non magnam rerum quia nihil quae. Facere quos sunt odio illum soluta.
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...
Ea accusamus beatae aut nihil mollitia. Sed quibusdam omnis repellendus sit.
Temporibus quisquam omnis sit quas. Consequatur provident impedit consequatur voluptatem aperiam. Veritatis dolores a ut voluptatem iste. Expedita vel et rem et. Laudantium quis rerum blanditiis sequi quasi. Mollitia delectus dolores magni nulla minus quibusdam.