Does getting carry even matter once your are 40?
I am at a large cap fund with European waterfall, and quite shocked to see how little carry my Sr. Directors have realised despite being in their late 30’s and having done this job for 10+ years.
They all already have kids, bought a small home in a somewhat T2 neighbourhood of the city, etc. It made me wonder if the carry will still be a game changer in their lives when they get for the first time a large liquidity event in the next 5-10 years.
Hear me: a lot of cards already have been decided for them as they have wife, house, kids, etc. Sure they could probably buy a bigger house and move closer to the city center, but their kids have their friends in their school, wife has made friends in the neighbourhood, etc.
It’s kinda of done in terms of life choices. They can’t take a first class ticket and go to Las Vegas have fun with the boys, it doesn’t feel the same to travel luxurious to paradise locations with young kids, you can’t regularly go out to enjoy fancy dinners & parties, etc.
Feels like the money somewhat buys happiness or at least experiences when you are in your late twenties / early thirties. But once you are settled with family it kinda feels getting a $5M liquidity event won’t drastically change your habits.
People will probably say it helps with kids college and their lifestyle expense keeps growing eg daycare, private school, vacations cost 4x instead of 2x as family grows. Also remember in this career of you stay you're also just trying to keep up with peers and such.
That being said I think your logic is onto something. Also unfortunately in your mid 30s and 40ds onward you and/or loved ones start getting health problems and dying so life doesn't have the same shine.
Man I had ONE kid and my vacation costs are like 4x purely because I can't fly cheap like this (WAY too painful) and I can't stay at mediocre hotels lol
Just stay single lift and use finasteride so you still look young and can keep it going and marry later anyway
Nah finasteride made my dick not work properly - wouldn't rec
You can apply finasteride topically on just your scalp and it won’t go systemic and cause any of those side effects. I’d recommend that!
Would be careful with this. I took fin for 3 years, worked like a charm but had meaningful sides come up after that and I've been off for 2 years and still don't feel the same
What sides? Have been on for a year but giving me low blood pressure / heart palpitations so stopped last month
It’s my view that PE is a vehicle to make sure your kids are raised well and taken care of. It’s such a long term wealth creation strategy, esp these days with stretched out exit timelines, that you’ll do well as a VP - Principal - Jr Partner but you’re not going to be truly wealthy.
Dude it seems like almost everything you mention here is a function of having kids. Obviously there’s a societal norm to have kids but it’s your life — if you don’t find kids additive to your life then don’t have em.
money fundamentally is a tool for you to use to meet specific needs. Theres lots of other things you don’t mention eg college education, and private school education is expensive. If yoy want to send your kids to Exeter and Harvard it takes cash. Travelling exotically, again, to ppl who really like having kids might even be more fun with kids, and takes cash wns even a big Disney trip is expensive. Theres also a middle ground and maybe you hire a nanny etc to give yourself a break from kids which again is expensive.
This is all super subjective and no wrong answers. I like to think that if I had a partner I really liked, the marginal return to spending money on them too would be higher than spending it today as I basically have what I need as a single guy.
But ya man you’ll always see the 30s sometimes 40s guys in Budapest acting like 20 year old guys.. that can be you if you want
Budapest lol, oddly specific
Yeah it matters lol, you still have a ton of life left to live and buy cool stuff and do cool things?? Not sure why it wouldn’t matter
Agree people assume living in one place + kids = game over… but you’re in your early 30s and still have 50+ years to go
this post: "whats the point of grinding in high school? by the time you graduate you will be 18 and life is already over by then. might as well enjoy youth"
Ever heard of retirement
I'd also add that a lot of mid-levels and seniors in PE over-lever themselves (big mortgages on first and second homes, lease all their cars, etc.). While their lifestyles look glamorous, the long-term math genuinely doesn't work without eventual carry payments.
The illusion of opulence is often actually living 'paycheck to paycheck' (just with a big paycheck) but minimal savings leftover for retirement or college funds. I've seen peers making $1M+/year who are worried about $25-50k bonuses to make ends meet - wild times.
It's a good point. The sequencing of net worth growth and your personal life rarely match up. And it's annoying. Think it often results in relatively wealthy folks living in smaller houses / lesser neighborhoods because by the time they could afford 2x the house in the nice neighborhood, their kids were 11 and 9 and set in their school / friend group.
What it does, however, is provide you security and inner peace (massively underrated) and lets you do misc "lifestyle upgrades" along the way -- fully-funded college funds, new cars, new kitchen/master bath, country club membership, nicer vacations/easier traveling, etc
Then it gets good. The kids are gone. You have a huge nest egg built up because you've been living a bit below your means. Stay healthy and thrive in your 50s and 60s
"The sequencing of net worth growth and your personal life rarely match up"
funny this is a complaint on the site but its the entire reason the finance industry exists (matching sources and uses of capital as project needs and cash flows rarely align)
Ironic innit?
This is pretty depressing ngl. 30+ years of grinding just to have finally made it and at that point your body doesn’t work as well anymore, your social life probably looks vastly different, and you are entering your sunset years. What kind of life is that? If anything, this tells me I should gtfo of finance and actually just enjoy my life
Or just sacrifice, save like crazy for 5-7 years and then coast the rest of your life. Sure you won't retire early but you can work a 40 hour job, have a nice nest egg, enjoy family, and get to golf every weekend.
If you were to save the after-tax portion of your bonus, here's what it'd look like. This is not even close to "saving like crazy" and this is the bare minimum us IB and PE folks should be doing.
IB AN1 - $50k
IB AN2 - $55k
PE ASO 1 -$90k
PE ASO 2 - $100k
PE SA - $105k
Compound that at 8% and when you hit 50 years old, you'll have ~$3M in retirement. You'll be a multi-millionaire by ~45... This is assuming you don't save a single dollar at any other point in your career.
If you can make it to IB or PE, you have essentially ensured you can live life on easy mode once you are in your 30s... It is unfortunate that no one wants to make the sacrifice the first 5-7 years.
Yes. This is a generally valid point.
Like fds said, there are some things that add to costs (ie - college, potentially going to private school), but fundamentally once you get to your mid-to-late 30s, your lifestyle is pretty much baked in. Unless you are going to get truly generational liquidity events (ie- you make $50M+), you are pretty much "fixed" in your lifestyle
Really good post thinking about life issues and reward two and three steps out.
Delete
This is the same as asking does money even matter once you are 40? It does for most. I am late 30s and have never received a carry check, but place high value on my unrealized carry which will hopefully fund a few large life expenses.
Agree that European waterfalls are not great, but I have several friends and family in that category, and yes, it matters a lot. For most, it's the difference between being in debt and being (if you want) debt free.
The PE salary funds your lifestyle, while your carry is for acquiring stuff; Summer house, winter chalet, boats, cars, etc. It's not a radically different lifestyle, but it means you may be staying at your places rather than a hotel when travelling. You know that you can comfortably retire at any point in time, and you have a safety net to take care of your extended family financially.
Spending money to experience things in your 40’s, but especially if there is a liquidity event, you think about:
traveling more with the family/kids and being really accommodating with wife or myself to travel with friends without the spouse and kids. While you’re afraid of lifestyle creep with the heightened vacation travel, in my mind there are a limited number of exotic places I really want to visit, so in some way there is a sort of cap on my desire (maybe I’m wrong). I figure if you want to visit places at least once in your life, doing it sooner is fine because you hope to do it anyways.
university: I’m of the belief that only a select name universities make a big difference in getting your first job out of college (there’s a cut off like in the West Coast, UW, Cal, Stanford, USC, UCLA (particularly in local hotspots); the tier below seem to be all the same for hiring. For example, UC Davis might be a much higher ranked school vs the University of Hawaii (where I went), hiring doesn’t put one on a pedestal over the other, they look more at the candidate. What I’m saying is getting into top 20 schools seem really hard these days and I’m fine with my kids going to the University of Hawaii with $20K state school tuition costs and get to experience the same place my wife and i experienced. They’ll have generational money to help them out later in life. And I’d encourage them to find something they are good at and degree up in grad school. Anyways, got into my child education philosophy, but at a certain point in your mind, the kids will be ok money wise. Maybe it’s a lot less than 1st generation American mentality, but I’m more about playing your own game than comparing.
Other than that, no need anything else (don’t need fancy car, hand bags). Helps to have a spouse who is value conscious.
As someone with a wife and kids, this is a crazy take. Would I rather receive a large sum of money at 40, or not receive a large sum of money at 40? There’s a long list of things I could do with that money, both for my kids and for my wife/me. Kids’ college education, private school, better sports lessons, extravagant trip or gift for my wife… hell even a nicer TV, grill, golf clubs for me. A nicer house in the same neighborhood… this is a wild question.
I understand the take from a macro perspective, but it’s not like your life is over at 35 or whatever when you have kids. People are always growing, making new friends, finding new hobbies, etc.
Completely agree here, some of you guys need to stop trying to extrapolate how you will be thinking decades from now. I probably thought the same way as OP before I had a wife and kids… but my viewpoint / thinking has significantly changed over the past decade (and even just the past year). It’s actually more important for that carry check post-40 than pre-40. The piece of mind is worth more than just the comforts / luxuries you can give to your family with that payout.
Also, a lot of people don’t think this way but early 40s is the midpoint of most careers… there is still a lot of time left after that payout. You can take that money and ensure all essientials are taken of / funded and then push more risk for the next 20 years and see if a big swing pans out. That is the real benefit of this industry / job, if you are willing to grind you have a clear line of sight to real money (not generational wealth) at a relatively young age that can be used to chase that generational wealth at some point. You can literally spend half and reinvest half of that carry check after cap gain tax and end up with $10mm in 20 years @ just an 8.5% return per year.
That's why it's create a company and then hire. Even more so w/ AI's 10 year trajectory
I'm sure they're great at office politics, god bless them
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