Do A Lot of Bankers Waste Their Money?

First of all, this isn't a bashing thread, so please don't take it as that. I recently spoke with one of my friends who worked in investment banking and one thing he said was that he was surprised how hard it was for him to save money despite him earning a great salary for a 22-23 year old. Not only is NYC an expensive metro to live in and a lot of money gets spent on taxes, rent, food, transportation (even the subway tickets are somewhat expensive he says), etc. but also, the culture of investment banking, in a way, made it hard for him to save money.

For example, he said that there were many occasions where he went out with his banker friends/coworkers and spent a ton of money at bars on drinks, etc. or going to expensive shows, etc., which ended up putting a decent dent in his bank account. Of course he can resist this to some extent, but he also said that at some point, he felt compelled to give in because otherwise he'd lose out on networking opportunities, and also not be as close to his coworkers, which would make it harder to move up or get into PE/HFs.

My question is whether or not issues like this are common in IB/Consulting or other front-office/high-finance careers? Are there a lot of bankers who end up not having a lot in savings because they spend a lot or is this experience that my friend had atypical and more dependent on the culture of the group than finance as a whole? As an outsider, I know there is some tendency toward a models and bottles lifestyle in IB, but I also thought that that stereotype was exaggerated given the hours bankers put in, so I'm just curious about this.

Comments (65)

Mar 6, 2013

1) your friend is full of sh*t.
2) bankers don't make a lot of money after taxes
3) bankers spend most of their money on rent, food, and coffee

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Mar 6, 2013
banker00:

1) your friend is full of sh*t.
2) bankers don't make a lot of money after taxes
3) bankers spend most of their money on rent, food, and coffee

I dont think this is the case for everyone...i knw 1st year analysts that after taxes, rent ($1k/month in LA), and max contribution to 401k ($16.5k) after their first year still had about $40-50k in savings (they both own their own car and dont do much outside of work other than go to bars or the gym)- lets assume 20% of the savings i listed above STILL goes to random other shit (watches, expensive clothing, strippers etc) you'd still be left with $32-~$42k (and rmrbr that if you want to max your 401k for some sort of firm matching program). then again both these analyst did get $55k bonus at their MM so it depends how you're getting paid as well...

but ya west coast = best cost :)

Mar 6, 2013
AnalystMonkey2769:
banker00:

1) your friend is full of sh*t.
2) bankers don't make a lot of money after taxes
3) bankers spend most of their money on rent, food, and coffee

I dont think this is the case for everyone...i knw 1st year analysts that after taxes, rent ($1k/month in LA), and max contribution to 401k ($16.5k) after their first year still had about $40-50k in savings (they both own their own car and dont do much outside of work other than go to bars or the gym)- lets assume 20% of the savings i listed above STILL goes to random other shit (watches, expensive clothing, strippers etc) you'd still be left with $32-~$42k (and rmrbr that if you want to max your 401k for some sort of firm matching program). then again both these analyst did get $55k bonus at their MM so it depends how you're getting paid as well...

but ya west coast = best cost :)

I think you summed it up in the last sentence -- NY is not the same living as CA. As for my part, I think it's difficult, but certainly doable. It's about knowing your limits, prioritizing, and spending in accordance with your goals. Those friends who spend all their money want to spend all their money -- but you don't have to. You can save. When you go out, buy at $8 beer instead of a $15 jack and coke (either way you're getting screwed, but at least you can get screwed less).

Mar 6, 2013

Salary plus bonus: $135,000
Less 401k: ($16,500)
Less Taxes (40%): ($47,400)
Less Rent ($1800/mth): ($21,600)
Less Food/Ent ($200/wk): ($10,400)

Even this gets you down below $40k in savings. Subtract car insurance, gas, utilities, cable/internet, gym membership etc. and you can understand why most NYC analysts end up with no more than $20k in savings after year one.

Mar 6, 2013

In this scenario, waste is somewhat of a relative term as when you work in IB you're under a set of unique circumstances (ie: working very long hours). This means your definition of the word "waste" becomes different than what a normal person's definition would be. Two relevant points I'd bring out:

1) Paying for convenience - When your free time becomes severely limited due to the amount of hours you're work, you start shelling out more money for the luxury of making use of that free time. For instance, you take taxis a lot more often rather than wait for the bus or subway even if the cost of the taxis is disproportionately more expensive.

2) Stress - Given the pressure you're under, you'll find yourself needing to "blow off steam" every once and while; and obviously spend money to do so.

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Mar 6, 2013

It's all relative. I've saved between 45-70% of every paycheck I've had since graduating, and I still do banker things (Ferragamos etc), the key is to not constantly go out and get hammered. Every night you go out is at least $120 with taxis, bar tab, cover etc. if you do that 5-6 times a month, that's almost a grand in waste. I go out big maybe once a month, otherwise I just grab a few brewskis at the local sports bar. Here's what my budget used to look like as a first year analyst:

Salary after tax: $4,000
Rent: $1,300
Utilities: $100
Food: $100 (mostly ate at the office)
Random crap: $450
Savings: $2,050.

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Mar 6, 2013
newfirstyear:

Food: $100 (mostly ate at the office)

Well done, sir

Mar 6, 2013

No shit, the hell do you eat? bird food?

Mar 8, 2013
nonos:
newfirstyear:

Food: $100 (mostly ate at the office)

Well done, sir

haha. awesome.

I'm just a humble clown. I juggle around just for a good laugh of yours.

Mar 8, 2013
newfirstyear:

It's all relative. I've saved between 45-70% of every paycheck I've had since graduating, and I still do banker things (Ferragamos etc), the key is to not constantly go out and get hammered. Every night you go out is at least $120 with taxis, bar tab, cover etc. if you do that 5-6 times a month, that's almost a grand in waste. I go out big maybe once a month, otherwise I just grab a few brewskis at the local sports bar. Here's what my budget used to look like as a first year analyst:

Salary after tax: $4,000
Rent: $1,300
Utilities: $100
Food: $100 (mostly ate at the office)
Random crap: $450
Savings: $2,050.

Does your "Salary after tax" account for bonuses?

Mar 8, 2013
knivek:
newfirstyear:

It's all relative. I've saved between 45-70% of every paycheck I've had since graduating, and I still do banker things (Ferragamos etc), the key is to not constantly go out and get hammered. Every night you go out is at least $120 with taxis, bar tab, cover etc. if you do that 5-6 times a month, that's almost a grand in waste. I go out big maybe once a month, otherwise I just grab a few brewskis at the local sports bar. Here's what my budget used to look like as a first year analyst:

Salary after tax: $4,000
Rent: $1,300
Utilities: $100
Food: $100 (mostly ate at the office)
Random crap: $450
Savings: $2,050.

Does your "Salary after tax" account for bonuses?

I sure hope not.

Mar 6, 2013

100$ on food? No f'ing way

Mar 6, 2013
FutureBanker09:

100$ on food? No f'ing way

My roommate used to go to Whole Foods for dinner and would pick up groceries with the remainder of his dinner allowance. I think it's possible in that type of scenario.

Mar 6, 2013
duffmt6:
FutureBanker09:

100$ on food? No f'ing way

My roommate used to go to Whole Foods for dinner and would pick up groceries with the remainder of his dinner allowance. I think it's possible in that type of scenario.

There's just no way. What about breakfast / lunch / coffee? You can't cook these meals for yourself when you're in the office.

Mar 6, 2013

.

Mar 6, 2013

Who is able to pay $1,300 in rent in NY? Why is that not like $2,000?

Mar 6, 2013
FinanceWiz:

Who is able to pay $1,300 in rent in NY? Why is that not like $2,000?

I pay less than $1300 and have a sick apartment with a huge patio. It's called having roommates....

Mar 6, 2013
rufiolove:
FinanceWiz:

Who is able to pay $1,300 in rent in NY? Why is that not like $2,000?

I pay less than $1300 and have a sick apartment with a huge patio. It's called having roommates....

I pay $1150 for a sick apartment in arguably the best neighborhood. Having a girlfriend has its upsides.

Best Response
Mar 6, 2013

Post #1,005 on this subject.

You are not going to get rich as an analyst. Your are building a career. Max your 401(k). Put some money away and have fun. You are working 100 hours a week and want to make your life more miserable by eating Ramen ever day and having 3 Coors Lights?

Some of the people on this site are tweaked.

Mar 6, 2013

Spending $100 or less on food per month is entirely realistic if you get seamless web everyday ($25 limit at the office)...this is pretty much 2 meals, so lunch and dinner is pretty much paid for on weekdays, and on some weekends. My food bill 2 months ago was around $70-80, and bar tabs added to roughly $500 the same month....at this rate i'm saving 18-20k on base alone per year, and able to live in midtown at the same time

Mar 6, 2013
quag_mire:

and able to live in midtown at the same time

You said this as if it was a positive.... haha

Mar 6, 2013
quag_mire:

Spending $100 or less on food per month is entirely realistic if you get seamless web everyday ($25 limit at the office)...this is pretty much 2 meals, so lunch and dinner is pretty much paid for on weekdays, and on some weekends. My food bill 2 months ago was around $70-80, and bar tabs added to roughly $500 the same month....at this rate i'm saving 18-20k on base alone per year, and able to live in midtown at the same time

There's just no way!! Seamless Web pays for dinner, not lunch or breakfast or coffee. Where do you eat lunch that costs

Mar 6, 2013

I guess I should have clarified a little more - I use the $25 to get 2 meals instead of 1 (2 entrees, 2 sandiwches etc), and use one for dinner, and the other for lunch. For breakfast, I eat cereal, which is also taken care of by seamless, because the delis and cafes I order from also sell cereal, which I keep ordering every 2-3 days (1 cereal order is good for 2-3 breakfasts, and milk is free in the pantry). I also don't pay for coffee because it's free in the pantry. Most 1st years go in on atleast one weekend per week, so seamless should take care of lunch and dinner expenses on that day. So besides rent and utilities, my expenses are pretty much alcohol/going out/entertainment, which comes to around 600 ish a month (or about 150ish per weekend, sometimes a little higher).

Mar 6, 2013
quag_mire:

I guess I should have clarified a little more - I use the $25 to get 2 meals instead of 1 (2 entrees, 2 sandiwches etc), and use one for dinner, and the other for lunch. For breakfast, I eat cereal, which is also taken care of by seamless, because the delis and cafes I order from also sell cereal, which I keep ordering every 2-3 days (1 cereal order is good for 2-3 breakfasts, and milk is free in the pantry). I also don't pay for coffee because it's free in the pantry. Most 1st years go in on atleast one weekend per week, so seamless should take care of lunch and dinner expenses on that day. So besides rent and utilities, my expenses are pretty much alcohol/going out/entertainment, which comes to around 600 ish a month (or about 150ish per weekend, sometimes a little higher).

I think this makes you pretty unique. Because the last thing that I want for lunch when I'm in the office is more Seamless Web. Hell, there are many weekends where I voluntarily forgo the free lunch / dinner to go eat with friends or get something that's not Seamless. I'd say that's very much the norm here. I would be suprised if more than 1% of people can manage

EDIT: And you're managing this in S&T? How much are they making you work? Most of my S&T friends are out of the office long before Seamless hour (even the ones in structuring don't get Seamless every night).

Mar 6, 2013

My desk and role is a little unique in that I don't get in as early as the other guys. I'm in at around 8:30-8:40 ish in the morning and out between 8 - 8:30 PM most days. I'm the only analyst in the group and we're running VERY lean.

Don't get me wrong, I go out to grab dinner/lunch + drinks with friends too on weekends, but these expenses I throw into the "alcohol/going out/entertainment" category I mentioned before, since I'm always grabbing food/drinks together at the same time. The

Mar 6, 2013

To each their own, but I could not imagine living in NYC, working in finance and living a life I would consider acceptable while banking $30-40K AFTER 401K.

Mar 8, 2013
TNA:

To each their own, but I could not imagine living in NYC, working in finance and living a life I would consider acceptable while banking $30-40K AFTER 401K.

I'm with you on this. I tried to exactly break even on salary (incl. funding 401k but hitting ~75% of max) and then save 2/3 my bonus and put the rest into my travel/fun account. Granted I lived in NYC during better bonus years than analysts today have. Work was too stressful to not have fun. I also lived with multiple roommates at rates that I locked in downtown a few months after Sept 11th (yeah, I'm old) in what was at the time a sketchy building.

Over the course of my time in NYC, I saw many of my colleagues/friends run up a ton of debt with the mentality that they'd pay it off come bonus. I hope analysts aren't doing this anymore. I thought it was dumb back then, and today it would be substantially worse.

P.S. I did know one guy, who was a college friend, that saved like that. He lived in a ghetto place in Queens and took a long ass subway ride to work, but he mostly slept in the analyst lounge. He didn't drink for religious purposes so he didn't even care to go out. All he did was work/eat in office/sleep for 2 years. He was tougher than me because I would have ended myself with his life.

Mar 8, 2013

According to a friend of mine, most the analysts at my friend's Singaporean office save the majority of their compensation eg. apparently an analyst had his business school fees in cash. This might be because the nightlife isn't as obscene there as it is in HK, London and NYC.

One of the analysts where I interned said that analysts can take two approaches:
1. save every penny you can and live the conservative life and use the bonus as guilt-free spending money on a holiday, bars and all that jazz, or;
2. choose to make life easier and make "convenience purchases" to make life easier out of your base salary and bank the bonus for a rainy day

I'd try the first approach, but would most likely adopt the second

Mar 8, 2013

I'm a huge subscriber to the "convenience" spending mentality. Many people would consider this wasteful, but I view my time as way more valuable than my money (two years in banking will do that to you). For example, when I was visiting other cities for my MBA interviews, I stayed in hotel rooms rather than with friends. This easily added $150+ / night, but saved me from having to sleep on a couch or air mattress. I take taxi's instead of normal transit and pay for valet parking instead of self parking. When I move, I hire a moving company for $3k - $5k rather than rent a u-haul and do it myself. I'm sure I've "wasted" tens of thousands of dollars throughout my entire career on these sorts of conveniences, but how everyone allocates their earnings is their own personal decision.

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Mar 8, 2013
CompBanker:

I'm a huge subscriber to the "convenience" spending mentality. Many people would consider this wasteful, but I view my time as way more valuable than my money (two years in banking will do that to you). For example, when I was visiting other cities for my MBA interviews, I stayed in hotel rooms rather than with friends. This easily added $150+ / night, but saved me from having to sleep on a couch or air mattress. I take taxi's instead of normal transit and pay for valet parking instead of self parking. When I move, I hire a moving company for $3k - $5k rather than rent a u-haul and do it myself. I'm sure I've "wasted" tens of thousands of dollars throughout my entire career on these sorts of conveniences, but how everyone allocates their earnings is their own personal decision.

When I was in the BO and my roommate was doing his analyst stint at a BB, I was literally amazed at how much dry cleaning/wash and fold he did. He wore a shirt for a 5 hours on a Sunday? Dry clean. Wore dress pants once? Dry clean. All of this went through the concierge in our apartment, which had jacked up rates for the convenience. He was probably spending ~$50/week to keep his clothes clean and wrinkle free, which was unfathomable to me at the time.

Once I started working 80 hours a week, it suddenly made sense.

Mar 8, 2013

This, but let's apply it to the earlier argument about going out. So you save roughly a grand a month by having relaxing, boring nights instead of partying it up. So let's say $10k a year.

Who cares about $10k a year? The only reason you are in finance is to make it to a baller role in your 30s/40s, where you make so much fucking money that it obliterates the relevance of $10k/year. You think you are going to look back and be so glad about pocketing the $10k in lieu of having fun?

On the contrary, this theory probably makes me very poor at personal finance.

Mar 8, 2013
paulanderson:

This, but let's apply it to the earlier argument about going out. So you save roughly a grand a month by having relaxing, boring nights instead of partying it up. So let's say $10k a year.

Who cares about $10k a year? The only reason you are in finance is to make it to a baller role in your 30s/40s, where you make so much fucking money that it obliterates the relevance of $10k/year. You think you are going to look back and be so glad about pocketing the $10k in lieu of having fun?

On the contrary, this theory probably makes me very poor at personal finance.

I concur with this. Save your bonuses, spend your base. Fully contribute your 401k, but there's no real reason to be pinching pennies when you're at trough earnings potential.

Mar 8, 2013

100 dollars on food per month? Proof or never happened. I live in a country which can be bought by any large IB cash straight out of the pocket, so the prices are lower and still spend like 3 times more on food alone.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

Mar 8, 2013

from my experience most junior bankers I know are horrible with personal finance and yes we waste a lot of money, gets better year by year but still sometimes feels stupid

Mar 8, 2013

I don't think so, simply because opportunities to spend are so limited. Even if you drop 2-3k when you have a free long weekend on travel/partying/sports/clothes, you aren't doing that more than a couple times a year. Besides that, its hard to spend more than 1k a month, add another 2k for rent with the vast majority of meals/taxis/cell on expenses (literally my only other recurring expense is a FIOS internet bill) and even at a 50% marginal tax rate you should be saving 2k+/month your first year, plus your whole bonus after tax. If you are spendy and go to lots of live shows, nice dinner with the girlfriend or sporting events, you might only be able to save half that, but its still enough to fully contribute to your 401(k), especially with match. The guys with no savings are at places that aren't paying out bonuses but living in ignorance of that fact, and trying to do things people do with bonuses out of salary (i.e. sick 1-week vacation, full rotation of hermes/ferragamo ties, bottle service at their birthday party).

Mar 8, 2013

Well living in NYC on its own does cost a fortune. The only reason I want to do it (live there) is for the lifestyle.

Mar 9, 2013

I've heard it is difficult to save money because you don't make as much after taxes as you assume, and NYC is expensive. You are essentially investing in your future earnings.

Mar 10, 2013

I'd say most investment bankers waste their money. I don't know if it's a trait inherent in investment bankers or if it's something you develop being around other bankers, but I've noticed people scaling up their expenses as they earn more money in an unnecessary way (just for the sake of it). This is from the already-high expense base that analysts feel they have to incur: designer suits and shoes, tailored shirts, more expensive apartment than necessary (although this is debatable), multiple big nights out a week etc. It's a life of multiple runs to Starbucks, unlimited Nespresso capsules, basically things that could easily be cut down on. I understand that a lot of the spending is coping-related, but I've never done half of these things. Or rather I usually went for the slightly cheaper option in each case; bringing my own nice coffee in and a French press, buying good suits but looking for a good deal, and more importantly not constantly clubbing. Still easy enough to get laid without incessant bottle service nights.

So yeah, in my experience, bankers are among the worst with money that I've seen, especially considering how high even the base salary is when you think about it. This gets compounded with the 'spend your salary, save your bonus' idea which is very good, but doesn't mean spend ALL your salary.

Mar 10, 2013
Genesis:

I'd say most investment bankers waste their money. I don't know if it's a trait inherent in investment bankers or if it's something you develop being around other bankers, but I've noticed people scaling up their expenses as they earn more money in an unnecessary way (just for the sake of it). This is from the already-high expense base that analysts feel they have to incur: designer suits and shoes, tailored shirts, more expensive apartment than necessary (although this is debatable), multiple big nights out a week etc. It's a life of multiple runs to Starbucks, unlimited Nespresso capsules, basically things that could easily be cut down on. I understand that a lot of the spending is coping-related, but I've never done half of these things. Or rather I usually went for the slightly cheaper option in each case; bringing my own nice coffee in and a French press, buying good suits but looking for a good deal, and more importantly not constantly clubbing. Still easy enough to get laid without incessant bottle service nights.

Multiple nights out? Is this banking?

Mar 10, 2013

I do a good job of not wasting money in the traditional sense, however, I think I'm definitely "wasting" money by havin all of my non-401k savings in a 0.0% checking account.

It's somewhat irrational, but I just don't know enough about investing and the equity markets being at all time highs and interest rates at all time lows make me unclmfortable. I know that I should probably just dollar cost average into low cost etfs, but can't bring myself to do it. Sucks thinking about the compounding I'm goving up...

Mar 11, 2013
Aero:

I do a good job of not wasting money in the traditional sense, however, I think I'm definitely "wasting" money by havin all of my non-401k savings in a 0.0% checking account.

It's somewhat irrational, but I just don't know enough about investing and the equity markets being at all time highs and interest rates at all time lows make me unclmfortable. I know that I should probably just dollar cost average into low cost etfs, but can't bring myself to do it. Sucks thinking about the compounding I'm goving up...

At the very least, throw it in some high quality fixed income and hold til maturity.

Mar 12, 2013
duffmt6:
Aero:

I do a good job of not wasting money in the traditional sense, however, I think I'm definitely "wasting" money by havin all of my non-401k savings in a 0.0% checking account.

It's somewhat irrational, but I just don't know enough about investing and the equity markets being at all time highs and interest rates at all time lows make me unclmfortable. I know that I should probably just dollar cost average into low cost etfs, but can't bring myself to do it. Sucks thinking about the compounding I'm goving up...

At the very least, throw it in some high quality fixed income and hold til maturity.

Is there really any short-term high grade fixed income that pays shit?

Mar 10, 2013

What you call waste, I call living. You are making well above the average person and will do so going forward so really at some point you need to start living.

For those who spend less than $500/month on food, I would really like to know how you are getting laid or when. Girls costs money, dating costs money so either you are lucking out with the cheapest dates ever, or you are not adding your cost of spending a crapload the bar to pick up one nighters, or you are hiding the budget for escorts.

Girlfriends cost $$$, friends with benefits cost $$$, escorts cost $$$. So how exactly you getting by with these $20 dollar dinners please tell.

Mar 11, 2013
marcellus_wallace:

What you call waste, I call living. You are making well above the average person and will do so going forward so really at some point you need to start living.

For those who spend less than $500/month on food, I would really like to know how you are getting laid or when. Girls costs money, dating costs money so either you are lucking out with the cheapest dates ever, or you are not adding your cost of spending a crapload the bar to pick up one nighters, or you are hiding the budget for escorts.

Girlfriends cost $$$, friends with benefits cost $$$, escorts cost $$$. So how exactly you getting by with these $20 dollar dinners please tell.

There are people who fall under "friends with benefits" you know...

Mar 11, 2013
marcellus_wallace:

For those who spend less than $500/month on food, I would really like to know how you are getting laid or when.

Easy. Date models. They don't eat.

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Mar 11, 2013
Unforseen:
marcellus_wallace:

For those who spend less than $500/month on food, I would really like to know how you are getting laid or when.

Easy. Date models. They don't eat.

Goddammit, stop giving away the secrets.

Mar 11, 2013

Saving money as an analyst is much harder than you would expect, particularly if you have a girlfriend. Long distance makes it even worse (flights, nice meals every weekend, etc.)

Mar 11, 2013

In college in NYC, here's the breakdown per month:

Income: 0

School: -6,250
Rent: -1,500
Food: -750
Entertainment: -750
Misc: -500

Yeah, NYC is expensive.

Mar 11, 2013

I always love these threads. Once again just do what you enjoy. I could never live like that. I mean what is the point of making money if you are not going to enjoy it. If I wanted to wear Walmart clothes and eat ramen noodles I would sure as hell be doing something I find personally enriching.

I hit the 401(k) max, save part of my bonus and build my network / business. Focus on paying down any debt you have and keeping your fixed expenses at a minimum.

God bless everyone with these minimalistic budgets. Not my cup of tea.

Mar 11, 2013

$100 in food is epic.

Anyone else working that ~50% effective tax rate? California is the best state in the Union.

Mar 12, 2013
BlackHat:

$100 in food is epic.

Anyone else working that ~50% effective tax rate? California is the best state in the Union.

Waiting for the inevitable default / restructuring to move back. Going to get worse before it gets better.

Mar 11, 2013
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