I don't plan on saving money as an analyst and I think that's ok

Intern in IB - Ind

Before I go into what I am going to spend the money on, I need to give a bit of background on my situation. I paid my way through college, working multiple jobs during the day and taking night classes. I lived in a tiny apartment, commuted to school, and grinded my way to an offer doing IB at an upper MM firm. My parents aren't very wealthy and also work several jobs just to get by and help however they can in paying for my school.

Now for what I'm going to spend the money on. I plan on spending $2-2.5k/mo on getting an apartment with a doorman, central AC and heating, and an elevator. I also plan on giving my parents money so they don't have to work as hard and maybe can retire a few years earlier.

I know I'm probably going to get the usual, "Good luck living paycheck-to-paycheck when you're 30" or whatever else has been said on the other threads with a similar message. I don't really care though. I did some back of the envelope calculations to figure out if I deduct all living expenses, including the apartment, from my salary and give roughly half my bonus to the family, I am still left with $20k in savings after the third year as an analyst. After that, I plan on doing some more intense savings with any income.

Curious to hear if anyone else has done something similar and if so, how it worked out.

Edit: Something I'd like to mention for the people in the comments is that my parents are very competent with money and won't be relying on me to support anything they do. They're probably going to try and refuse the money at first.

Comments (48)

Most Helpful
Oct 15, 2019

I would suggest you looking into investing money and giving that cash flow to your parents. I just happen to know RE more than other asset classes and know it can be pretty straight forward. If you were able to break into IB then you can sure as hell do residential investing math.

Buy a duplex (doesn't have to be NYC), and rent it out. Maybe you get $200 a month. That's $200 a month forever. Give that to your parents. Next bonus season? Another $200 a month forever. Next bonus season? You get the point. Pretty soon your parents will be able to retire forever AND you have equity in each building. Your NW goes up.

10-15 years later, your rental income should go up and your properties should be low leverage. You've got 10+ properties by now. Your parents are chill. You can take an easier job and keep reinvesting.

Sounds simple because it's not overly complicated, just hard to stay disciplined. But it'll be worth it. You can retire with your own passive income and pass it off to your kids so they don't have to take care of you (assuming you want kids).

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

    • 9
    • 1
Oct 15, 2019

Also my numbers aren't that far off. Assuming you invest $50k a year for a 4.8% cash on cash return. Sounds like you can invest more money by living cheaply (good on you, this is huge) and finding better deals. This can move the needle quite a bit.

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

Oct 17, 2019

Where outside of RE are you getting more than 3%?

Don't quit!
Oct 16, 2019
Malta Monkey:

I would suggest you looking into investing money and giving that cash flow to your parents. I just happen to know RE more than other asset classes and know it can be pretty straight forward. If you were able to break into IB then you can sure as hell do residential investing math.

Buy a duplex (doesn't have to be NYC), and rent it out. Maybe you get $200 a month. That's $200 a month forever. Give that to your parents. Next bonus season? Another $200 a month forever. Next bonus season? You get the point. Pretty soon your parents will be able to retire forever AND you have equity in each building. Your NW goes up.

10-15 years later, your rental income should go up and your properties should be low leverage. You've got 10+ properties by now. Your parents are chill. You can take an easier job and keep reinvesting.

Sounds simple because it's not overly complicated, just hard to stay disciplined. But it'll be worth it. You can retire with your own passive income and pass it off to your kids so they don't have to take care of you (assuming you want kids).

Dude this sounds so simple. I was thinking of buying my mom a rental. It's not simple. It's simpler to just buy rentals for yourself, learn to manage or hire a PM, and just pay for shit for your parents. My immigrant single mother has no clue what to do with RE. Her self-managing would be a joke. Look, this is the last text I got from her.

She gives her social to Indians routinely.

I was sending her cash for a while, but giving cash to someone who's bad with money... something funny happens. They just find ways to spend it on stupid shit. She, in clandestine, has been going to Home Depot and stocking up on shit for her full bathroom remodel she wants to do in the house we just bought her which has a perfectly good bathroom. She now she has a garage full tile, toilet, sink, etc. She didn't think it through and has to park her car in the driveway now. Meanwhile, she has an empty shed in the yard which my kid brother has set up as a smoke room for when he's home from college.

So anyway, I don't think it's a good idea to make investments on other people's behalves nor is it a good idea to give them cash. Cover their expenses and let them make their own cash. Pay their car note. Pay their mortgage later if you can.

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 5
Oct 16, 2019

Also $200/door is garbaggio cash flow sorry had to add that

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 2
Oct 16, 2019

Great points. Just to clarify- I meant for OP to buy them himself and manage them himself/ hire a PM. Then give the actual profits to his parents. Which goes onto your second point- you're right about that. If the person is bad with money they're bad with money. Much smarter to cover someone's expenses if they're bad with money. Otherwise it might be okay to give them cash. But still, my parents are so frugal it's ridiculous. So if I were to hand them money it would go straight into savings.

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

Oct 16, 2019

this is eventually how I think universal basic income will work out...people will essentially just spend more money on Chipotle instead of Mcdonald's

Oct 17, 2019

A scammer got mad at my mom and hung the phone up on her because she genuinely was not able to follow his directions. Its super distressful. At this point I am trying to set up a fund to place her in a home where she can be taken care of.

Don't quit!
Oct 18, 2019

Take the phone number off the screenshot before she gets more messages from people here

Oct 16, 2019

How exactly would you buy a duplex as a college grad? Taking out a loan?

Oct 16, 2019

The best way to buy RE is with the right balance of leverage

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

    • 1
Oct 16, 2019
EBITDaBaby:

How exactly would you buy a duplex as a college grad? Taking out a loan?

google house hacking
FHA or conventional

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

    • 1
  • Prospect in IB-M&A
Oct 21, 2019

You are acting like there is no risk involved...

    • 1
Oct 22, 2019

There's always a risk involved with everything you do in life. You mitigate risks as much as possible and execute on it. You mitigate this risk in real estate with specific knowledge and leverage, much like any other risk you might take. Driving even applies- specific knowledge (red means stop, green means go, generally follow speed limits) and getting into a safe car.

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

Oct 15, 2019

Where's the rest of your income going? I'm at 2nd year so $90k base and after taxes I get a bi-weekly of ~ 2,300 or so. Are you giving your parents half of your income?

  • Intern in IB - Ind
Oct 15, 2019

Not planning giving them any of the salary. Used my current cost of living in NYC and factored in monthly change in rental expense, increase on discretionary expenses to about $1000/mo (I'm going to go out to restaurants, go on dates, see sports games, etc.). I taxed the bonus at 50% and planned to give them the rest of whats left of that. Also paying back student loans accounted for a big portion of my monthly expenses.

  • Associate 2 in CorpDev
Oct 16, 2019

How do you manage to blow all your pay? Girls, booze, gambling or something else

Not being sarcastic, just seriously impressed.

    • 1
Oct 16, 2019

For what it's worth, I do think it's smart and truly, truly admirable giving back to your parents.

I was in a much different position - where I started at a much lower compensation and, through my early 20's, the amount I could save was effectively irrelevant relative to me spending it on having a good time, etc. As I it my mid-20's, the whole having very little savings and burning cash became less and less fun - and much, much more stressful. It only takes one or two things to knock you off - most of them things you'd never expect. Eventually, if you are diligent, you can keep your living and other costs relatively fixed and then expand your savings as your income, all-in, grows. That worked out relatively well in my case. If you are comfortable with the risk profile you are setting up - i see no issues, just be aware that when something doesn't go as planned you have to just roll with it.

Last thing I would advise of you is, with respect to your parents, make it very clear that they are not to depend on the help you are giving them. I've not personally experienced this, but from a few examples i've seen the big issues are when you are giving them support - you lose your job, and have to pull back or eliminate it - and things get ugly. I cannot speak to the character of you or your parents, but if you are all open and up front about it it's probably better than the alternative.

    • 4
  • Intern in IB - Ind
Oct 16, 2019

Thanks for the response; this comment in particular is helpful. I feel I'm aware of the situation I'm putting myself in given that I've paid almost all my own bills in NYC for three and half years now. I know things change rapidly and one day in the middle of this, I could be without a job. I just genuinely couldn't imagine myself doing this any other way.

In regards to my parents, they are not the type of people to depend on me in any way. Knowing them, they're going to try and refuse any money I try to give them.

Oct 16, 2019

Have fun, do what makes you happy*

*You will eventually need to stop doing this and you should also have some money tucked away. By some I mean multiple months of living expenses. I don't feel comfortable without at least a year, but that varies by person.

Oct 16, 2019

one piece of advice, don't spend money you don't have; also, don't spend money before its made, that's how you get into trouble.

Don't overspend, or buy too much (I would say nothing) without paying cash. Too much leverage gets people in trouble. For example, if buying a bunch of houses and renting them out was that "easy', then everyone would do it.

Also, as stated above, you don't have to get your parents money, though it a nice thought. My advice would be, if you think you're better at handling money then them, invest what you would give them, get a good lump sum, then give it to them. That way its one time, and if you need it for something else you still control it.

    • 2
Oct 16, 2019

Hi,
It is okay to be left with $20k savings as an analyst. Think wise and make use of the RE platform to earn more bucks which can eventually improvise your savings on the whole. Learn some of the techniques to invest in RE here.

Oct 16, 2019

Cliche as it is, "treat yo self" is going to be a very important concept in IB because of the stress and shitty hours.

You seem to know what you're doing, however just bear in mind more cliches that have often been proven true:

  1. Life often does not work out the way you've planned. You're young and full of ambition and grit, but you may end up having plenty of reason to quit within a year. Or be let go. As an analyst, so many things are out of your control at work. My first year in finance, I was certain that I would never quit. Ended up working for someone that everyone else across the floor (almost openly) called crazy and an absolute nutjob. I quit.
  2. Always save for a rainy day. Seriously, you will never know when you need that money, and from your family background, it doesn't seem like you can lean on them for that if you need it.

Your background and your choice to enter IB suggests that you are a risk averse person. Therefore, make plans for contingencies. While you are still fresh from school and eager to be pummeled by analyst life, you need the less material and creature comforts to prevent the burnout, and you should take advantage of it.

If you are going to make just one change, trust me, try to save that 20k in your first 6 months rather than your 3rd year as an analyst.

    • 3
Oct 16, 2019

Tangent off this, (I think Jalen Rose said this), the worse thing isn't being poor, its being poor, getting to a rich standard, then having to going back to being poor.

Right now you don't have expensive tastes (probably), or are use to living on lower quality. You don't what to have to go from sandwiches, to steak and lobster, back to sandwiches.

    • 2
  • Intern in IB - Ind
Oct 16, 2019

Thanks for the response and advice. I'll try doing that.

    • 1
Oct 16, 2019

Set up joint brokerage accounts with each parent and leave the cash in the money market or invest in some index or mutual funds.

Oct 16, 2019

Personally, I wouldn't look to penny pinch making IB money but I definitely would try to save as much as possible while still maintaining a good, but not out of your means, standard of living.

It's all about building good habits

Oct 16, 2019

Anyone ever see an analyst buy a Ferrari or something like that?

Oct 17, 2019

My first year out of school I didn't save much money because I never had money to spend growing up and it was fun having it (and what I didn't spend I just threw at loans and nothing else). I realized after a year that I was generating less happiness from spending relative to the anxiety of feeling bad about spending all my money, so year 2 I went super frugal. Couple years later I'm at a sizable chunk of change saved and I'm able to spend a $400 on a really nice dinner and not sweat it, which makes it more enjoyable than before.

Oct 17, 2019

I dont know about your parents situation too much, but why would you funnel cash up the family tree when then you'll have to pay taxes if you inherit from something. Do yourself a favor and save your money, finance is a high risk high reward job, you can be out of the door for no reason. Invite your parents on holidays or something whereby you get an experience with them.

  • Intern in IB - Ind
Oct 17, 2019

The assumption is that all the money I give them will be going towards their expenses (mortgage, care for other family members, maybe retirement, etc.). It's not like I plan on giving them $60k and I will get $20k in 25 years.

Oct 22, 2019

But do they need that cash today? Money is the most fungible thing in the world, so as other posters have pointed out, both you and your parents will be better off if you invest your extra money and have it available for them later in their life if they need it. If they don't, you'll have it.

Otherwise you're both making a series of unsolicited donations to the US treasury.

PS - The thing your parents probably want most from you is time / visits. Keep your money but spring for some plane tickets home, a few nice meals your treat, etc. Unless that's going to cause them to miss a mortgage payment, forego medical treatment or something else financially pressing, everyone wins.

  • Associate 2 in CorpDev
Oct 17, 2019

Cool story bro

Oct 17, 2019

I am saving 35% of my post tax salary at probably 30~40% of a 1st year salary. Its your money you do what you want. Use your money any way that adds value to your life.
I shop sales all the time, but if I want something I'll buy it. That $120 Eaton shirt at Nordstrom rack, yeah I bought that. Six pairs of mid range casual shoes. Chicken Alfredo Pasta for $30 bucks? Hell no! I can have fun making my own Alfredo and garnish with truffle for the same price. Donate money? okay I don't do that either. Maybe $300-400 bucks a years, but I do give my time. I wonder if i'll ever regret saving money. In MBA programs to they ask you for the size of your savings and checking account when considering financial aid?

Do whatever you want with your $$$$$$$$$$$$$$$. If it really makes you happy on a Porsche Panamera, or pay to get your Macan lifted and equip it with cheesy chrome wheels. You do you

Don't quit!
Oct 20, 2019
Comment
Oct 20, 2019