How wealthy are MF/UMM VP+ from a lifestyle perspective?

A PE VP is 28-32 so no they aren't that wealthy. The the money is on paper. They make mid 6 figs so that pretty good. Principals from 31-36 are probably reasonably well off they make 700+ and may have a carry check or 2 from their VP days that materialized but still vast majority wealth on paper.

Cracks me up that you described this as upper middle class.  I actually agree with you though - just shows that this level of wealth really doesn't change your life a whole lot other than having financial freedom (which probably does bring a lot of peace of mind).  Real wealth is $50M+ IMO

Just because he’s not flaunting it doesn’t mean he doesn’t have it. Read a synopsis of millionaire next door.

Just a thought. People spend money differently based on their priorities, how they grew up (poor vs middle class vs trust fund baby), inheritance, etc. I’ve seen people spend way below their means that are actually stupidly wealthy between their total comp, other investments like property, and a fat inheritance that they got from a grandparent or something. They drive honda civics and other than an annual vacation or two they live relatively middle class lifestyles. Ive also seen people who work as teachers stretch their salary to the point they’re making bare minimum contributions to retirement and missing on savings sometimes just to “live a certain lifestyle” and flex designer brands on Instagram. And I’ve seen the combo of the above two where somebody is still finding their passion and living comfortably on their parent’s dime knowing they have their golden parachute to fall back on to support their lifestyle if they never find that passion.

All that being said you don’t know your MD’s background or personal finances so your guess is as good as a shot in the dark.

Money's effect on your life operates in step functions rather than linearly

OP's point is an interesting one- my lifestyle did not really change from my first day as a banking analyst to my last day as a senior associate despite making ~4x as much. The rungs above me made 2-3x more than that, and their lives were basically the same as mine. Once you make a certain amount, you get to a point where you can afford everything "normal" without blinking: nice dinners whenever you want, a couple fancy vacations a year, the lease on a nice car, and eventually, a nice apartment/house or two in attractive areas. Ah, the "middle class" life- we made it

To get to the next step function where your life materially changes again requires a big increase in wealth (3-4 multi-million $ houses, exclusively traveling via PJs, etc.). I think of this as being worth north of ~$20mm with a very high paying job. Then the tier above that (3-4x?) is owning a PJ, yacht, etc. 

I think what many of us figure out sooner or later is that the incremental effort, time, and tradeoffs necessary to get to those next step functions are just not worth it even if you assume you can get there with enough hustle

A lot of super insightful reply guys on here with their "$500K iSnT mIdDlLe ClAsS... wow really, who would have thought lmao ... focus on the meaning not on two poorly chosen words you midwits 

I'm going to set aside the question of whether a cash income that can support multiple children in private school is middle class and assess the meat of the conversation.

TL;DR: no they are not rich at MF or UMMs and I sure as shit ain't at a LMM fund. On paper, sure (as other posters mentioned). But the likelihood of carry coming through is fairly low for 3-7 years post start date. Super well compensated on a W-2 basis, but K-1 income is the generator of wealth.

As a bit of an illustration, my situation (married no children) with a household W-2 income of ~$600k (wife works a chill job that makes her happy) isn't all that different to when I was an associate. Still eat out at nice restaurants whenever I want. We're in a city where having two cars is important, so we have that, a house we love, take vacations pretty much wherever we want, eat out when/wherever we want, and end up saving probably $100k per year without even thinking about it. When carry comes through, I think of it as a waterfall: (1) GP commit for the next fund, (2) coinvestments, (3) rental real estate, (4) incremental improvements to my house (e.g., California Closet) and (5) something expensive and stupid for me and Mrs. 

Finally, as an avgeek, I would also note that posters above are absolutely right that attaining some number that "unlocks" the ability to fly private (this is unsurprisingly common among mid-level IPs across funds) is a huge driver. But the idea that this is primarily driven by "status chasing" isn't quite right. The ability to visit hard-to-get-to places (e.g., Nantucket, Aspen) with a minimum of fuss is what motivates me to achieve a level of disposable income (and net worth) that will allow me to fly private. I travel so much for work that time with my wife and loved ones is at such a premium already-- I would rather spend time at a destination than at an airport.

Not sure about VP/principal, but friend’s dad is a MF PE partner and just bought a 30 million dollar home in Connecticut. I know another partner that lives a pretty frugal lifestyle. I think it ultimately comes down to personal preferences, it’s not always the case that people will put all of their money into material goods.

rich from whose perspective? is really the question

being "rich" assumes context, otherwise every american is rich to the average person in the world

the average MF VP is rich to the average american - they earn more than 10x the median income

they may not seem rich within the context of NYC - they still live in an apartment, couldnt retire immediately and maintain their lifestyle, and don't have unlimited capacity for extravagances - i.e. they still have a budget. what this ignores is that supporting a family in NYC in the "middle class" style is itself a major luxury, as typical middle class people live in places where a house costs 300k, not 2mm. "regular people" in nyc dont have private school and live in manhattan - they live miles out in queens and brooklyn, they pack tons of family members into tiny apartments, and they live lifestyles that would not feel acceptable to the typical privately educated wall street guy

VPs are pretty poor. $600k gets you about $350k cash post tax. As stated above, you have a carry amount worth $5mm but it's all on paper. 

Principals/Directors are a bit better. You're clearing $1mm+ cash, $550k post tax. Get another $200k a year in carry. $10mm+ of carry but it's on paper. 

People commenting here do not know how expensive NYC is. OP’s MD is definitely UMC not upper class. Now if he had that income in a tier 3 city it would be extremely different.

What percent of hypothetical carry (based on 2x fund and vesting fully) do you think VPs and above actually realize on average? I have $5m in hypothetical carry but give about 0 weight to it because either I will leave before it vests or markets will tank.

You should also probability weight the chances of you actually being around long enough for your carry to vest and receive an actual check.

People in PE can live a good lifestyle simply off the cash comp but the carrot / generator of wealth is anything but guaranteed 

a) how do you know he doesn't come from money in the first place? most fihnuancers come from privileged backgrounds

b) they also mostly don't understand negative lifestyle inflation. is he well off if he spends 95% of his monthly disposable income on renting cars, eating out, vacations, private schools and gadgets? he could be a couple of months away from financial ruin

c) there are a few posts about how carry is a bit of a scam, how its easily lost, vests over long periods, not what it used to be etc.

Lifestyle scales pretty linearly with income in our NY finance world and doesn’t really become non-linear until you surpass $3m cash earnings per year (consistently not a blow HF year or start-up monetization).

When I was a college senior I thought $200k a year was all the money in the world. Nowadays, my credit card bills alone are probably $100-150 ($200-300k pre-tax), which is basically just groceries, restaurants, incidental spending, and vacations. Pretty nice, but not overly ostentatious. Buy nice but not the best clothes, vacations, restaurants, cars etc. Still try to be sensible thrifty with money, etc. Need to be saving/investing, buying a home, saving for kids educations, etc.

NYC is ridiculously expensive. You can make $2-3m a year and feel like your squarely in the upper middle class, living comfortably but still being aware of money/spending.

Most of the banking MDs I know live pretty ordinary lives. Splurge on stuff here and there because that’s the culture of wall st and especially banking which is an outward sales job. Same way you see realtor with Hermes bags and AP watches.  They live in the burbs bc it’s cheaper, they go on okay vacations, they buy stuff if it’s heavily discounted, etc.

Making $1-2m isn’t rich in our world. But to my friends I grew up with, that’s probably what they make in 10-15+ years.

Thread confirms that private equity is paradise, with investment banking being second tier paradise.

The value of one’s wealth is different per person. Perhaps he seems upper middle class to you but I’d guess he’s definitely above that relative to the broader census. It could just be that you come from similar circumstances so it seems more normal to you. Also, if he spends more on a slightly bigger home, pricier cars, more expensive meals, private school, and the similar, while investing into safe investments and diversifying only in the stock and fixed income markets then yes, he will appear somewhat similar to many middle class families – albeit with slightly nicer things. The real money to become insanely wealthy comes from taking on risk in alternative investments and becoming a business owner where a majority of your wealth is reinvesting and returning over 20% a year. Those are the people who take there lifestyle to the next level, by delaying their desires now. However, that draws in the question of sacrificing your end goal for the current means of achieving that goal. Really, it’s a lot more of a complex answer with two multiple variable equations impacting the outcome and the perception of the outcome. Also, as people get older they care less about things and don’t see a need to have a more “lavish” life style than what they already have even if they can afford it. However, someone with his life could very easily be making a few million through fairly autonomous small businesses by his age if they play their cards right. It just takes the right desires, delayed gratification, and the discipline of patience.

This site is deranged. Both of my parents were high school teachers growing up and drove old Nissans. THAT is middle class.

A few things to add just to give a bit of color. 

-I know this site trends young and that thinking about your career from a lifetime perspective is a bit hard when you are in your early / mid 20s, but one of the most important thing people here don't realize is that there are no guarantees that you will be able to maintain a super high income across your entire career. In PE, making the switch to partner is really hard and there are only so many partner seats available and I know quite a few people in my network who topped out at the VP / Principal level and never managed to find a comparable gig on a partner track. Don't get me wrong, these people are all in very good job now, but the point I am trying to make is that you should never count on clearing ~$500K cash / year for your entire career and base you lifestyle and spending around that. 

-Priorities and the willingness to work long and stressful hours does diminish for a lot of people once they have kids. The compounding from investments you made earlier in your career goes a LONG way to provide security for the later part of your career, especially given the change of priorities I mentioned earlier. It hasn't been uncommon for people around me to save 50%+ of their after-tax income while at the VP / Principal level (especially if they don't have kids). Real estate aside, I've seen very few people make the kind of extravagant purchases that are often referred to on this site.