How much money would you call wealthy, or how much would it take for you to leave banking?
Hoping to get some perspective on this. After a conversation with a friend where I briefly joked about my taxes being more interesting than M&A, he began asking me why I was even doing banking, claiming that with the money I had, I didn't need to be doing the 80hr weeks and grunt work, and if he were me, he'd just take a cushy Corp Fin job (or no job) and live off investments. I don't think I'm that wealthy, and frankly, I somewhat enjoy banking and making my own money.
I don't know if my perspective is skewed because of my background: I was raised very middle-class. Think TX suburbs with the following, house: same as everyone else, cars: newer, but always a Chevy or Ford, vacations: relatively frequent, but nowhere exotic and amenities were overall average, activities/lifestyle: pretty much the same. I always knew we were well-off, as my parents funded $400k of college for each my sister and I without blinking an eye, and it's not like I ever felt insecure or needed a job, but I never thought of us as wealthy. I've continued to live a relatively modest, or at least average lifestyle compared to my peers. I dress the same, rent my own one-bedroom in SF, occasionally go out to eat at nicer places, and for clubs I usually go to a nice place but don't go wild.
Now, I've inherited a few million which I haven't ever touched, in part because it's just in growth investments, and I don't feel the need to take it out. I'm in-line to inherit more later. But my question is essentially, for any of you individuals, what would be the amount where you would say, fuck this shit, I'm done. Or, what would you even consider to be wealthy?
If I had 4-5 million after tax right now I'd probably quit and try to figure stuff out on my own.
What do you mean by "figure stuff out on your own"? I thought about that, but genuinely don't know what I would do if not banking, and I don't have any connections to raise my own firm/fund.
It would be enough for a solid house/apartment and to buy a rental property or two to AirBnB. Potentially buy a small business and also self-manage a 7-figure stock portfolio with a bit left over for alternatives (collectables, gold/silver, crypto). I could hire a person to manage upkeep for the rentals and some to run the small biz so I can focus on the portfolio with most of my spare time (Currently I only invest in 2-3 high conviction names although right now it's just 1, I could bump it to 5-6). Between the passive income from the rentals and assuming I could at least generate a 3-4% return on my portfolio that's basically all the money I'd realistically need to live comfortably.
Could start literally any business in the world dude, and you dont know what you would be outside of an excel monkey?
christ.
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Thanks for your input, I still have a ways to go to hit 40m but with some luck...
Whatever portolio size needed to earn me a passive income of $240-360k/yr after taxes.
To me wealthy is whatever is needed to passively support their preferred day to day lifestyle. I gave my value above, and so I'd tell anyone to reach the level of lifestyle they want (housing, family, hobbies, experiences, a savings method to cover unscheduled events), and figure out what it'd take to be able to live that way until you move out of your house into a pine box.
Don’t care to define wealthy, but if I were in your shoes, I’d absolutely leave banking with the swiftness. Doesn’t matter what the hell you do as long as you don’t go on a crazy spending spree. Can go be a yoga instructor for 15 hours a week to keep you busy and cougar deal flow sourcing
Ok my edit was a bit rude, sorry
I get what you're saying about leaving banking, most of my colleagues don't enjoy banking but are in it bc they have families to provide for or something to prove in that sense. I guess I'd characterize it as "hungrier".
It's just a bit hard to relate, and as to your edited scenario, I don't have to imagine...I was raised in a hardworking family, have a sister and gf in medschool, and the rest of my family is and has been in equally grueling professions. I've never known anything different than working hard. It was do all the clubs, sports, other teams in hs and compete on the weekends, join all the investing clubs in college and network/party on the weekends, and now it's just excel and I'm still having a good time on the weekend except instead of having to go home to study for my *insert test here*, it's tapping out a few emails while I'm at nobu or worst case scenario going home to rerun all the numbers .
My number is 7mm, which includes my cash, taxable and retirement accounts but equity in my real estate, jewelry and cars are not counted.
Nothing less than $30 Million is wealthy to me. Below that I would say rich, to well off. Doing okay to poor.
Somewhat agree with that, honestly even when I run the numbers to say I could work less, I don't feel comfortable with that idea knowing that there's still so much more out there, my few million is just a drop in the bucket comparatively.
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Agreed, I'm not so lucky as to have 30mm+ yet, but feel similarly. Even when I run the numbers, I can never seem to justify not working as hard as I do, it almost seems like it would be a letdown to not pursue another high-paying, "prestigious" career. Will say, it is nice to have that extra cushion for finances, never had to worry about things in college, and still don't have to worry about a night at Nobu killing my savings, lol.
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I always thought I would retired once I get a jet. Nowadays I highly doubt that. Probably will continue doing what I do until the day I die tbh. Simply out of the enjoyment I get from being good at what I do and beating the next guy who is slightly ahead of me.
If you have millions of dollars, you’re in too good of a spot to waste your time doing IB. Create a plan of attack and put your money to work so you can live off of it. Maybe launch a startup. Just my 2 cents.
If I inherited a few million I for sure wouldn't be doing banking. Are you really passionate about it? Does it get your blood pumping? Do you have an unreal culture with a solid WLB? Your profile says you are a 1st year analyst but your post also implies you have been in the M&A world for a while, so I guess question #1 should be how old are you? Starting in IB to lateral to other industries makes sense. Staying in IB if you are an Assoc / VP who is very happy and found that 1/100 banking role would also make sense. I would guess you aren't satisfied as you stated "doing your taxes is more interesting". If you are not extremely satisfied with your firm / role or coming straight out of UG, I cannot fathom why you would even consider staying in the industry, especially with how brutally high M&A volume has been lately. Surely regardless of your position (Analyst through VP) you must be utterly exhausted 24/7, and have felt this way for months if not YEARS?
However, if you've been in IB for multiple years and have your inheritance invested I don't see why you would subject yourself to IB. So question #2 has to be what makes you want to stay in banking?
Surely you are a bright guy / gal who can explore other opportunities that would permit you to make a reasonable take home salary with a fraction of the hours? If you can excel in IBD you can excel in most other areas of finance or even new industries entirely. Corp Dev, Corp Strat, Business Dev, FP&A, Strat Finance, working at a startup with equity and a reasonable WLB, going back to school to do something you're more interested in, any of these sound appealing to you?
First of all, thank you for your comprehensive response. And, you got me, a little. This is a throwaway for obvious purposes, I am a young twenty-something approaching one of the common places to exit. Addressing the rest of #1, I'm neither satisfied nor dissatisfied; doing Excel and being yelled at isn't anyone's idea of a good time, but it's par for the course, I'm not mad about it. And, for overwhelming work, objectively yes. But, college, and even high school were more overwhelming for me than IB has been--back then, it was managing major courseloads while balancing an absurd amount of community service, sports, other competitions, and still being a normal person who had my friends over and had regular kid experiences. Now, it's somewhat easier. It's the same, somewhat mind-numbing stuff excel document, but it's just frustrating when you're called at an inconvenient time to rearrange this, or re-run that, or change assumption A to B and see what happens.
I want to stay in banking because it makes sense. Thinking about PE exits, but it's not like that's truly greener grass. I enjoy the guaranteed pay, I like the underlying finance concepts, and I could someday see myself being a decent Partner. I've always been strong in leadership roles, but am not super entrepreneurial. The sense of security is also really appealing. While I know I have the money, it's not something I want to touch. It'll grow, maybe I'll dip into it someday but probably not.
Essentially, I don't have a reason to leave. My whole family works horrible hours, including my gf. It's just "what we do". My grandparents worked hard, and they made my parents work hard, who made us work hard. My whole life, I was groomed to enter Finance, Law, Medicine, Dentistry, or Engineering, so it's not like I have any real hobbies or anything else I enjoy doing. I'm not averse to entering a new industry, but I don't know that there's anything that really fits me better than banking. Strat finance has always been a fun little prospect, and I could work at a startup, but it's almost like, eh. Why work even harder than I do in banking with the risk that it doesn't pay off for me. I don't want to be *that guy* in my family who *only makes <100k a year* especially if something went wrong. I don't feel like I have enough money for real freedom, even though I objectively do have a decently sized cushion, and ultimately can't see grass that's considerably greener than my path rn.
Unfortunately, I cannot relate to the whole work terrible hours for the "sake of the grind". This sounds like big time boomer logic. My parents both grinded and then slowed their hours considerably as they got older. I followed the same path. Personally, I strive to work as little as possible for the maximum impact (the polar opposite of IB). Working hard for the sake of working hard is admirable if you're a doctor, and the direct input (hours worked) leads to something meaningful (lives improved / saved). You are in IB, so the direct input relates to decks / models turned and best case # of acquisitions completed. So you want to keep grinding for something that is more or less meaningless? My entire life has been spent in M&A and while I find it very interesting it is just a job, lets call a spade a spade. Our jobs (and our industry) has just about zero benefit to society overall. Don't kid yourself into thinking otherwise. In my experience, I thrive when I work sub 60 hour weeks and we still close the same number of deals.
Additionally, you would feel judged for merely making 100k a year by your family? That alone should require some reflection, no? So long as you can support yourself and you're happy, that is all that should matter right? Idk man, I am not sure I should be the person to offer you guidance here.
1. You asked how much money would it take to leave IB entirely? A common answer on this forum is $5 - 10 mm from guys currently in PE who are looking to RETIRE. If you are merely looking to exit IB, surely $2 mm is enough of a nest egg to shop around until you find your next venture?
2. I get the whole PE exits, I do. Im currently looking at making the switch, but only because the fund Im talking to would have reasonable hours. But again it sounds like this isnt of interest to you.
3. Not knowing what else you would do if you left IB seems like the biggest problem. I am not you, maybe you're extremely happy. But I do know if all I had was work and the occasional hour or two with my GF for the next twenty years I wouldn't see much point in continuing. Take some time and try to figure out if there is anything worth pursuing.
4. Sounds like you are pretty content in IB right now, so maybe just focus on determining what makes you happy. It is also worth reflecting on what you would do to fill the crater sized void in your schedule if you left IB.
TLDR: Sounds like money isn't what is keeping you in IB, but it is a lack of interests in other things. Try to explore different things and as corny as it sounds, find yourself and what makes you happy.
For me to quit I would need $10 million after tax. At 2% withdraw and at least a 5% return I'd have $200k without even doing anything else while growing my money. In reality I would pick up a remote financial advisor or analyst role and make an easy 100k a year in addition to the $200k. I then could move abroad to a cheaper COL country and then get a massive pay bump relatively. But of course if you have kids and other expenses you might need more like $20-30 million. Wealthy is all relative. NYC finance people might not think wealthy is until you have 50 million whereas if you go visit another country they would think someone with 1 million is rich. It all depends on your perspective and environment
Wealth is not about the money, it is about the game. When you transition from money to the game, that is when you know you have reached wealth.
Whats considered wealthy is all relative on where you live. If you're an MBB senior partner in Ohio or Minnesota with 20 mill, you're a King. Similar to being a top surgeon or lawyer in Kansas or North Dakota. Can probably buy one of the most expensive homes in the state and live next to your local billionaire. You would be considered part of "high society" and be invited to all the upper class social events in your LCOL state as there are so few people with a net worth above 20 million in those states.
In NYC, SF, LA, Miami? If you're a banker, lawyer, doctor, consultant maybe you'll have around the same but you'll be considered an upper middle class working professional. Won't necessarily get invited to all the social events with the wealthiest in your city. You'll constantly be struggling to maintain status and keeping up with the Jones, etc. 50k per year private schools, holding a 4 million dollar mortgages on 5 million dollar homes with only 4k square feet, etc. Would peg the entry to "high society" in these cities at 100 mill... (and even then there are events that are billionaire + that you wouldn't be invited to.).
Agree with this. OP, if your dream is to live your days in a Charlotte suburb in a nice house, doing hobbies, etc. and banking doesn't get you going, then yea leave, go move, find something less "stressful" to do, etc. If what you see for yourself is living in NYC or Westchester in a $3-$5m home, sending kids to private school and driving a $100k car, then don't leave banking. You also have the opportunity to do banking / finance until you feel burnt out, and then leave, which just knowing that helps to make finance a lot less stressful.
For all those saying to OP that you can now buy rentals, start your own business, etc., all of those puts the capital at risk. Yes, returns could be great, but you could also lose half your $$. There are plenty of people in this position who say let me go start a real estate investing business, I'll find some LPs and put this money to work, make a promote, etc. Especially over the last 10 years, some of those people have 25x their money through returns + promote. But there are definitely people out there who got over their skis and lost a big chunk.
I also really don't understand everyone here saying obviously with that kind of money who would do banking. Many / most people in finance have this situation. Maybe not as obvious as having a few million in the bank, but a lot of the kids from Greenwich / tristate area who went to private school, had school paid for, etc. will have at least that amount handed to them, some maybe already do (I know plenty). Have seen the kids from 8, 9 and 10 figure net worths go through banking / PE for multiple reasons (they enjoy it, it's intellectually stimulating, need the resume boost to take over family business, need the experience to take over family business, etc.).
My two cents is if you don't know what else you would do, I would continue in banking and try to think and be intentional on what you want to do. To me this is the opportunity of hey, I'm really interested in "XYZ" product, and even though XYZ product PE pays less than MF, I can actually follow my interests, I don't need to optimize last dollar, etc.
As to your original question, I really enjoyed my early days of finance and didn't have a desire to be doing something else. I felt appreciated in the groups I worked in and felt I was surrounded by smart people and enjoyed the conversations. Yes, there were hard times, but even at the time I felt good about them if that makes sense. Sure maybe >100m NW I would've walked, but I don't even know (I would've just been overwhelmed). Now my number is probably $25m in today's dollars. That can afford me a nice apartment in the city or beautiful house in nice burbs and an upper class lifestyle - ordering in from the best restaurants / going to fancy restaurants, spending 1000-1500 / night at hotels for 3-4 trips a year, paying for best of kids' schools / activities. I don't need to fly private or first (except for long red eyes)
Agree with both you and poster above you. I definitely feel way poorer in SF than I did as a kid in TX, impact is compounded by the fact that now I charge my own accts and obviously make less than parents in TX. COL was way lower in TX, and even lower where some of my relatives live, think other, more rural southern states. And yeah, I definitely would feel more confident in my ability to move out to Charlotte/any other mid-size or small city in the South and live a good life with a lot more balance.
But addressing Username_TBU, I definitely agree with you on people of different wealth levels doing IB. I always hear people wanting to leave, which doesn't make a ton of sense to me, but perhaps it's complaining for the sake of complaining, which I can get behind. But on the other hand, there's so much nepotism, so it's almost ironic that IB is only to reach a certain amount of wealth. If someone with X million dollars shouldn't be in IB, then why tf is the MD's son/daughter in it, I know they have enough money by this logic to do something else (this applies especially if said progeny is good at their job)? Presumably to earn more money and because it's tradition, and keeps a person busy.
$5mil would be my number if I was going to "retire" at 30 and do my own thing. That would give me ~$175-200k to spend every year even at a modest 6% yearly return and 3% inflation, and even spending that much, my initial $5mil would go up to ~$20mil by the time I died. Granted I'm in a LCOL area. In NYC I would probably double that number.
Even getting to $1m is tough enough already, how would one even get to $5m?
First 100k / 1m is toughest. After that the money works for you - with average returns and so long as you aren't spending what you have (only what you make), your money doubles every 8-ish years, so probably takes you 10-15 years to go from 1m-5m assuming you get raises and can invest some / increasing amount of your income
Are you able to clarify?
How would the first 100k end up working for the individual?
I understand the $1m, but isn't 100k barely making a modest 2-4k pre year on returns? Or am I looking at this the wrong way?
Wealthy = >140MM USD NW or >7MM USD income/annum for the past ~10 years.
How much it would take for me to retire = ~44 trillion USD (enough to start a private militia, take over a decent-sized country (Turkey, Egypt, Indonesia, Nigeria, South Africa, Mexico, Venezuela) and turn it into a superpower, enforce my own ideals and genocide the minorities I despise.
Wealthy I would say is at least 15-20 million depending on where you are. My personal number would probably be around 7/8 million to leave the rat race.
Lots of interesting replies in this post and it makes for good conversation.
I become a little concerned when I see people say that they need multiple millions to stop working, like 7M+, 10M+ etc. That's either (1) you have a lifestyle spending problem that requires you to have a ridiculous income in retirement and/or (2) you don't have enough outside interests now and you hope to find them in retirement and you'll feel the need to go from one hobby/country/sugar baby/whatever to the other and find enlightenment (spoiler alert: that's unlikely to happen)
For me the number is 5M with the aim of it generating something in the range of 200k in income. I just want to play golf and drink wine (<$50/bottle) for the rest of my life. I don't need extravagance to leave banking, I just need peace of mind to do something that I already enjoy, just the ability to do it a whole lot more. Do you really need anything more than that in life?
You forgot the third possibility: one's insecure about money. That's personally where I am. I recognize the numbers, but they're just meaningless to me. Even though my life even as a kid was sustained with probs 250k a year despite parents net 1m in salary alone, not counting investments. I don't feel like I understand the value of money, except that I and my family love it, lol.
Yes, I can see that rationale. It's good to have a healthy appreciation for money and how big those numbers are compared to most people in the US (and certainly around the world). It helps if you didn't grow up with a lot of money around you. I grew up in a very, very modest household (both parents are teachers) so I tend to keep my wants/needs in check or at least appreciative of what I have.
You have an issue with people who say they want 7m or 10m to stop working but your number is 5m? Those numbers are same zip codes. It also sounds like you don't have kids or a family since you're looking at things you want for yourself and not for your family. That's a huge differentiator
It's true that $5M is still a big number but keep in mind that I'm referring to not having to work again, ever - all 100% passive income. That's not the same as some of these other replies that want 10M so they can go and be landlords for the rest of their lives (yuck!). Plus 200k on 5M is not a high expectation, I think it's relatively modest. I'd be leaving the banking world to play more golf, not less :)
Yes, not having wife and kids helps - it helps a lot actually. But you have to be willing to look at it as something that adds to your overall lifestyle expenditures and, quite frankly, most "men" are pushovers that end up creating spending that they can't keep up with (or put you in debt). Repeat after me, "No, Trevor, we're not going on ski week to Vail this year . . . " :)
Yes. I need more. I have expensive taste (eg, first class travel, housing / residency in very high cost of living locations, hobbies)
I don’t necessarily need to generate the same income passively as I do working but I’m not looking for a substantial discount so I can maintain the some standard of living.
Also need a buffer in case I do have kids.
$10M
I think a lot of this depends on how you want to live the rest of your life, I grew up in a very similar way to you, my parents put me and my siblings through college and we were comfortable but never wealthy. From my perspective I want to retire as young as possible to spend time with my family. And in order to do that and still provide my kids with the type of childhood I had if not better would probably be in the $15 million range but would decrease as time went on.
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