I tried to forecast how much money I will save, I estimate that I will have:
- £300,000 in savings once the Asso 3 bonus hits (ie after 6 years of banking)
- £740,000 in savings once the VP 3 bonus hits (ie after 9 years of banking)
Would be very helpful if some Asso 3 / VP 3 based in London could tell me if realistic or not
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For Aso 3 seems okay to me with normal lifestyle and this is where I expected to be as well but had a bit of a setback recently which costed me c.£30k and a delay in cash inflows as I was caught up in one of the layoff waves. VP3 seems like an overkill though?
I assumed no lifestyle inflation (so I will not spend more than today, which might be a bit unrealistic but I will try my best / I don’t want to assume any lifestyle inflation in my forecasts else it will encourage me to spend more). I will basically invest all the extra money I make. Also I am assuming conservative bonuses
£450k savings after 4 years IB/PE, but around 1/3 is in my pension.
Impressive! How did you make so much? Did you work at an EB?
Yes, I worked at an EB, and the market in 2020/21 also helped. But the biggest boost was making use of my accrued pension allowance. I paid zero income tax on my first associate bonus. I'm also fortunate to have no student debt.
Got it, so you dumped your entire bonus in the pension (so you saved 50% of it)
Btw what was the rationale behind putting all your bonus in the pension? Conscious that you cannot access it before 50 or 60
1. I effectively 2x my money from the tax savings, 2. I don’t plan to access the money before I’m ~60, and even if I retire early I plan to have more than enough in my other accounts to tide me over until I hit ~60, 3. Pension allowance tapers off when income reaches ~£260k, so you have to use it now or never. I won’t be making any contributions when I reach VP (beyond the £10k maximum).
OP here. 2 years later, just wanted to say thank you for your above comment, it influenced me in a very positive way. I will get my Asso 3 bonus in ~2 months and my net worth will be £600,000 (50% in pension, 50% in ISA / GIA). It totally makes sense to do that as (1) we won’t be able to do that as VPs due to the 260k tapering rule and (2) we WILL need money once you are 60+ so would be completey stupid to not use the pension allowance
Curious - What is you net worth now and how did you allocate investments?
Also do you mind saying few words on the EB you work at / and how is the lifestyle? Cheers
What % of your after tax income did you save in your analyst / asso years?
I’ll hit £450k post bonus of which £150k pension after year 6 bonus comes in. Obviously not ‘savings’ in the classical sense but mostly invested. I also plan for £750k+ at VP3 which seems imminently possible provided I don’t jump off a bridge before then
How did it go?
I’m actually VP1 above and totally forgot I posted on this thread 2 years ago. Im now a VP2 and I’m at nearly £1m per above, and a year early. So much better than expected. I also haven’t jumped off a bridge yet which is a win
3 years in, about £250k
Sounds extreme without prior savings or stock market windfall gains
Yep saved ~50% net but mainly got lucky with some well-timed investments.
If you are saying first 3 years starting at analyst level isn’t that nearly impossible..? You only probably net around 80k a year for first three years
Must have had prior savings? Let's say you average 100% bonus and thus £140k total comp as an analyst (which is super high), you would get about £80k after taxes. But then you ofc have costs for housing + council taxes + utilities + food + clothes + entertainment + transportation etc. Even if you share an apartment with a bunch of other dudes and don't have expensive habits it is unlikely that your living expenses are below £25k a year. And if you spend £25k a year on living expenses in London, you are living a dog's life for real.
I'd say either pre-existing savings or very very high returns on savings.
A1 here, I get similar numbers, have only projected to VP1 / rough buyside equivalent though, I don't pay rent, council tax etc.
Currently saving c.80% of net salary (after taxes) goes up every year to saving 90% of net salary once I hit VP
I spend c.18% of net salary on "living", going out etc. From A1 comp, you can work out what that is roughly, I have a nice time and can go out to restaurants when I want, life is good
Conservative assumptions
Bonuses from A2 to VP post tax in (£k) 10 (stub),15,20,20,30,30
c. 4% annual growth in savings from investments/cash interest
550-750 by end VP3 feels about right
Swing factors if you get married, personal situation (kids?), lifestyle, investment performance (when you focus on a house deposit you won’t be capturing 10% returns _ although current savings rate help. When i saved for my deposit the return on cash was zero, just hard work).
If you don’t have to pay for rent, bills and council tax you can probably add 25-35k per year of saving + return.
Lifestyle creep is real - by the time you’re Associate 2 you’ll book your holidays in bali or Maldives with flights in business. 30+k spend per year on holidays happens quickly, especially if you’re not British and go into « continental weddings season »
The 550-750 doesn’t assume crazy bonuses, doesn’t assume monastic lifestyle. Not crazy spend either, or crazy returns on investments.
You could be higher or lower due to any of these factors
I don’t know any Associates who fly business for holidays intercontinental let alone to the Maldives
Seems valid. I would not underestimate lifestyle creep. I'm not talking luxury cars, expensive homes (or vacation homes), but gradual creep across all avenues of life. Nicer apartment, getting the 4-star hotel instead of 3-star on vacations, Premium economy v. economy on international travel, etc. It adds up.
Associate 1: £150k in total (including pension and unrealised capital gains)
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