Just saw a thread on here about someone who is wondering what to do with the 60K they have saved after 2 years in banking. I'm going into banking myself (in a city with a similar cost of living to NYC but outside the US; banking pay is comparable) and am curious about how much bankers can/do feasibly save. If living frugally, how much can one realistically save?
How to Save in an Expensive City
While investment banking is a lucrative career, it’s also very easy to spend all of your earnings. How much you can save depends on a number of factors, but here are some steps anyone can take to make sure they’re building their personal savings while working:
- Set up a Personal Finance Budget Template
- Live off salary and save all the bonus (minus taxes of course)
- Take advantage of perks at work such as coffee/water/beverages, dinner, lunch, cab home, etc.
- Assess what you would be willing to sacrifice – ex: apartment, diners out, weekends out, etc. – but remember that the banking lifestyle is so intense that you’ll probably be willing to pay for these things after working long hours
Can't give you a dollar amount (still UG), but most people I have talked to/seen on this site say to live off salary and save all the bonus (minus taxes of course). Really depends on how you perform as an analyst and relevant tax rates.
Yeah that's what I've seen/read too. I'll rephrase my question- is it realistic, if frugal, to save some of the salary also?
It depends how much you sacrifice. You can save if you budget yourself to live on a lower salary than you are actually on. What people generally find is that this isn't worth it, because the hours in banking are so bad that you end up willing to pay for the extra things, such as better location on your apartment, nicer weekends out, etc.
You can save though, as dinner and cab home is almost always paid for at most legitimate banks. This alone can greatly reduce your spending. Even more so if the place you work has things like coffee, water, coke, etc. readily available (not always the case).
If you do want to save with your base, you won't be able to live in an ideal apartment, and you certainly won't be able to take girls out on a consistent basis. If you're incredibly good looking, this isn't always necessary, so gauge my words appropriately.
Truly Yours,
Booger
Hahaha great post. +1 SB
Taking into account a 70k base and a 30% tax rate, you have ~48k leftover, or 4k a month.
You can get a reasonable rent/utilities for $1500 a month, leaving you $2500 a month. Most banks don't cover lunch, so factoring in 16$/day you have $2000 left. Subtract $200 for transportation, $200 for dry cleaning/clothes, you have $2100 left. There's going to be the obligatory drinking, so take $300 off for that, and maybe another $300 in other sorts of entertainments (good food, gym, girlfriend, etc).
Leaves you $1500 to either save, spend more on rent, or have fun. $1500 sounds like a lot of space but it's really not - you'll find when you're working 80 hours a week you stop giving a shit about saving for the little things. With that said, you should be able to save most of your bonus.
Thanks, this makes me optimistic. Will be living in a place with comparable pay etc but I am relatively confident expenses on things like drycleaning/clothes etc will be lower. Should be able to save a bit, especially of that $1500 you mention.
But I can see how so much work would make someone want to save less and spend more.
Think about it, you can easily buy a suit every year or two ($500 at least), a couple pairs of shoes a year (another couple hundred), 10+ dress shirts (another couple hundred), casual shit (another couple hundred), and you divide that by 12 it can easily be hundreds of dollars a month.
Get on excel in your computer and search "budget" in the templates section. Fill everything in as best you can and you can get a good idea of how much you will be spending and how much you will have left. Keep in mind the things that were mentioned above-clothes, transportation, etc. There should be a spot for all of these. The above post mentioned lunch but not breakfast or dinner-depending on your position/bank they might be paying for dinner often, but budget for worst case scenario.
Jeez, this is solid advice. I didn't know about the budget template. The reason I am concerned/thinking ahead is because where I am, pay in IB is comparable but a much larger % of pay is salary, and bonus is a much smaller %. Therefore, can't rely on only saving my bonus and have to be careful not to spend too much of my salary.
Assuming a 70k base salary for most BBs, which I think is the norm. How much will a typical bonus be? I've seen a variety of numbers, but I feel like they have been down over the past few years. Is something like 30k your best case scenario?
I think last year BAML paid top bucket of 70k for first year analysts....I could be wrong but I think that's what I read. If true, I think that's also a pretty extreme outlier.
Damn 100% bonus? I didn't think those happened any more even for the best.
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