NYC banking salary --- where does it all go?
A reasonable breakdown for a thrifty analyst during a good year:
$125,000 All-in compensation
- 46,033 Taxes (29.7% federal/state/city, 6.2% social security, 1.45% Medicare)
- 19,800 Rent ($1,500 per month) and utilities ($150 per month)
- 6,000 Food ($500 per month)
- 6,000 Entertainment ($500 per month)
- 5,500 Retirement savings (max out Roth IRA, no 401K contribution)
- 2,500 Travel (holidays, vacation)
- 1,344 Metrocard ($112 per month)
- 900 Cell phone ($75 per month)
- 600 Laundry ($50 per month)
$36,323 Residual (save for home down payment, car)
Note: this doesn't account for student loan payments.
Budgeting Tips for Expensive Cities
- Live with roommates or in a different neighborhood to save on rent costs
- Don’t include bonus when you’re budgeting, only base pay
- Take advantage of meals and rides that work comps
- Don’t forget to include insurance costs
- Max out 401(k)
- Eat in bank cafeteria to save on lunch costs
Recommended Reading
- First Year Analyst Budget
- Budget How To
- Managing Your Money: Building a Personal Financial Model
- Personal Finance Budget Template
- I Can’t Save Money
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Wait, are you serious? Are the taxes really that high?
That rent is pretty high for a thrifty analyst.
The average non-doorman studio in Midtown East rents for $2,478 as of Nov 2013 (http://www.mns.com/manhattan_rental_market_report).
Don't create a budget that includes a bonus. You should create a budget off of monthly after-tax take home of ~$3500-4000. You should look at your bonus as extraordinary income and immediately put it in an investment account.
Also, who the hell gets a $2500/mo apartment as a 1st year analyst? Get some roommates and try to keep it under 1800. Everything else at least seems reasonable except entertainment as I tend to spend at least $100 a night when I go out.
Agree with this. Dunno how anyone can go out more than once and stay under $200 a month. I budget $400-$500 a month on this in a slightly cheaper city than NYC.
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You will pay something around that in taxes (maybe a bit less, but I am also counting SS in this calc).
Your entertainment/travel budget is probably a bit too low, depending on your friends, etc. Comes out to $50/week, that is barely 1 meal out, let alone grabbing some drinks. But of course that is more of an optional expense.
You will want put something into your 401K
Does your entertainment budget also cover clothing? Cab fares? Subway fares? Gym? etc, etc
What about renters insurance (usually pretty low)? Medical insurance? Dental? etc (at least it is pre-tax)
Entertainment is way too low. Even the nerdiest IB analysts I know spend that $200 in one night in the city fairly often.
Rest seems decent, as mentioned above get roomies and you can live in a killer apt for under 2K. Food is likely low too, even including seamless, you'll probably spend at least $50 on lunch during the week plus more for coffee, snacks, breakfast etc leaving only like $20-30 for the weekend/eating out which isn't really reasonable.
I forgot to include the cost of subway transportation. A monthly unlimited Metrocard is $112 x 12 = $1344. That would make the residual $24,581.
Taxes
Check out StreetEasy for apartments. As a first year out of college, I don't recommend paying the average rent for an apartment in Midtown East. If you make a good friend as a SA, try splitting a 1 bedroom. There really isn't any point in having some Patrick Bateman apartment when you won't be spending an abundance of time there. You're better off looking for something safe, clean, and large enough to fit a bed and your clothes.
You may want to max out your 401(k) when you get your bonus. Get 2 roommates (even if they're from CL) and live in Fidi, you can probably pay around $1200-$1500/mo for rent. That's just a basic operating leverage lever you have to pull at your age. Out of the $1000-$1300 you save on rent, all or most of it should go towards your paltry going out expense. Part of the NYC experience is going out while you're still young enough to crush it til 4am and still roll into work the next day; certainly can't do that on a $200/mo budget.
Would you suggest living in Fidi even if my office is in Midtown (near JPM Asset Mangement)? I'll be a first year IBD Analyst and not sure if the commute will be too long? Any suggestions?
Yes, you can live in Fidi and still commute to the JPM/Bear Stearns building in midtown. The 4/5 train wil take you straight there from fidi and the commute would likely be 20 minutes door to door.
I would cut your savings expectation to something like $10k which is what I was able to save on 125k despite lower rent than you. Like others have said, your entertainment/food/travel are all way too low unless you plan on having no social life. An avg night out is probably $100-150 and a date night is probably double that.
My rent is half what you have. My food is nowhere near 500/month since I eat at the office for every meal. Don't need a subway card if you live near the office...
your bank comps weekday lunches too?
You have to admit you're probably the exception with the first one. Do you go out to a decent restaurant a couple times a month? That with some basic shit every week wipes out 500 bucks quickly.
I also dont have a subway card.
Seconding what CodeBlue said - you're better off going into the year assuming that your bonus will be $0. If you want to live (relatively) cheaply in Manhattan, find one or two friends, find a good broker, and remember that you're going to be spending almost no waking hours in your apartment.
Rent is cheaper because I share with a friend. Most of my friends have rent in the 1200 to 1500 range.
Bank doesn't comp lunch but their cafeteria is way cheaper than outside places, and has awesome food. (Can get a big filling lunch for like $8)
I stock up on drinks and snacks with extra seamless dollars during the week and from the weekends
Weekend lunch/dinner is free due to seamless. And as a 1st year, I have been getting murdered in my group so no, I have not been going out to any restaurants really.
I'd say I spend about $200 on food monthly. Maybe 300 sometimes. Still, that's way less than this guy is projecting.
[quote=Will Hunting]
Rent is cheaper because I share with a friend. Most of my friends have rent in the 1200 to 1500 range.
Do you mind sharing where you live? My office is in Midtown and I'm planning on staying in Fidi for budget of $1200-1500 with a roommate. Do you think that would be too far of a commute? Can you get a decent apt for $1200-1500 in Midtown? (I've never been to North East, so have no clue on commute times for the Subway)
Rent is cheaper because I share with a friend. Most of my friends have rent in the 1200 to 1500 range.
Bank doesn't comp lunch but their cafeteria is way cheaper than outside places, and has awesome food. (Can get a big filling lunch for like $8)
I stock up on drinks and snacks with extra seamless dollars during the week and from the weekends
Weekend lunch/dinner is free due to seamless. And as a 1st year, I have been getting murdered in my group so no, I have not been going out to any restaurants really.
I'd say I spend about $200 on food monthly. Maybe 300 sometimes. Still, that's way less than this guy is projecting.
Just curious (this is a pretty immaterial consideration/shouldn't make a difference to anyone in terms of choosing where to work, but it's a nice lifestyle perk), but are you at a BB?
All the EB's I know/visited have ridiculous pantries/fridges that no one buys drinks/snacks. I probably drink/eat close to $40-50 of our pantry on a weekly basis. Sucks if you have to buy that on your own dime.
BBs depends floor to floor- some have what you mentioned - huge pantries/fridges full of snacks and any type of drink you could possibly want. Others have nothing save the standard coffee/tea maker. This is true at the 2 I am familiar with, at the very least.
Aside from apartment being much too high (1500-2000 can get a solid place w/roommates) and entertainment being low (400/month seems more reasonable), I think this is not bad. Food at 500/month is about right- $60/week (Monday-Friday breakfast and lunches) and maybe $65-70 for food over the weekend seem like reasonable numbers (I'm assuming 1 "nicer" meal over the weekend 30-40).
you also have to remember that NYC bonuses are taxed at ~50% so you can't just tax the entire 125k at the same rate
The city taxes salary at 6% and bonus at 50%?
It sounds like most analysts spend around $1,500 in rent and more like $500 in entertainment. I'll update the numbers.
For me, entertainment and food are way lower in your estimates than my actual spending. I'm more in the $800 in food, $600 in entertainment range.
And....
Then student loans suck me dry. You are also forgetting miscelleanous like birthdays gifts/holidays gifts, etc. which add up like bish. Insurance? That's another thousand or so..
Rent is way too high. Also, if you are thrifty, I think you could travel on a little less than $2500 (assuming you will even have time to in your first year).
C'mon guys, no one's going to point out the incorrect tax calculation?
Was going to mention it, but didn't want to take the time to try and correct it. I don't make IB analyst salary, but my taxes are significantly lower than the aforementioned.
I suppose the federal rate is a little high. Making $125k will put you in the 28% marginal tax bracket which will give you an effective tax rate of around 25%. I'll change it in the calculation. The state and city rates look right to me.
If you have anything additional to add we'd love to hear it.
Didn't feel like figuring out how to upload a photo, so here's a copy/paste of my tax calc. Hopefully it will look right.
tl;dr OP's tax number is way too high, should be $37,171.
Income $125,000
Tax Bracket Rate Amount
1 (Under 9,075) 10% $908
2 (Over 9,075, under 36,900) 15% $4,174
3 (Over 36,900, under 89,350) 25% $13,113
4 (Over 89,350, under 186,350) 28% $9,982
Total Federal Tax $28,176 (22.5%)
NY State Tax 6% $5,809 (4.6%) NY City Tax 3.5% $3,186 (2.5%)
Awesome I'll update it
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