Many people here are in what people consider "high finance" and are making pretty good money. I was curious as it comes to how long you are planning to work and the breakdown of your income into different buckets what your forecasting methods are?
For example, if you are in NYC in IB as an associate and bringing is $225K a year at 28 yo, how do you forecast your income 10 years from now? There are tons of different areas you could exit and so many variables. Do you take the scenario approach and target different pay levels, or do you try to smooth out a percentage increase and add/decrease in incremental changes due to expected life changes?
I'm graduating from my MBA and trying to budget out some of my next five years to see where I hope to be financially and was curious what WSO does to keep these budgets?
Never assume you are going to earn more than you are today. You very well may, but never bet on it.
Will you have a paid off house when you retire, or are you currently blowing threw money
2a. If yes, remove all but expected taxes in your area and insurance
2b. If no, reevaluate your life, or plan on bigger needs in retirement
Look at your historical spending, that’s the best bet to know what you’ll need in retirement for day to day expenses then add an additional 15k for misc per year
Assume you’ll be able to get 4-5% in fixed income when you actually retire and base how much you’ll need to save off of that.
What if you are early on in your career? I doubt your salary 2-3 years out of undergrad represents your salary in 10 years. I agree with being conservative, but that’d be insanely conservative.
Agree with everything else, this is similar to what i have in my forecast.
I think it’s smart to be ultra conservative. However, I’d recommend running the numbers multiple times ranging from ultra conservative to ultra liberal.
Yes, that's what I did, where top level I make MD at 45, and bottom where I get kicked out of PE and go to corp finance with a bunch in between. I still think it's pretty hard to get anything to really rely on in terms of income.
The higher you get, the more tenuous the job is, and the more difficult to find a replacement. Live conservatively. Blow and bottles (BTDT) is nice but expensive. Particularly right now, pack sandbags. The standard rule of thumb is 3-6 months worth of living expenses in cash. I'm closing in on a year personally.
A very simplistic rule of thumb is that you can spend 4% of your retirement savings annually. There is so much that this doesn't capture, but it should get most people in the right ballpark.
You could project out assuming normal promotion timeline in IB and street-level comp assuming middle bucket bonus to get a sense of where your goals should be, understanding that things could totally fall apart. That's done here in a spreadsheet that I saw circulated somewhere (probably here), based on pretty reliable sources (Mergers & Inquisitions through recruiters' reports): https://docs.google.com/spreadsheets/d/1h1N6rrvLRmapN2fwreSBL45I89azg2t…
You just would need to take this all with a grain of salt and understand that this could fall apart... you could apply haircuts to these projections as downsides for yourself. At the very least, consider trying to bank and invest as much as you reasonably can in your early years when you know the money is good so you hav ea good backstop to rest on through your career/life
This is great, I appreciate it!
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