What to do with my bonus??

Hey guys!

I am brazikian monkey and for the last days I've been thinking about what I am going to do with my bonus. I'm already in my third year working but have changed jobs in the last two, so this will be my first real bonus.

For my country, I will earn something about 30 - 40 K and i realized that if I just invest my bonus not using at least a part of it for something, I would not feel I had really earned it.

I don't want a new car.
For what I get on fixed salary I am already able to do some nice travels during my vacations.
I can just buy some stuff but there is anything big in my plans right now.
I may keep it to help me on mba but as I will already get a big lending to pay that will last 20 years, I don't se much sense.
I could use as a part for buying a house, but is not one my priorities right now.

So, what do you normally do with bonuses? What do u think I should do with mine?
I am thinking about using about 20% of it to start some service for community and use a part of it to help me in mba preparation (booms, consultants, etc).
Investing in a business is discarded too.

Thanks!!

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Comments (421)

Feb 14, 2016 - 10:36am

30-40k is not much money. I personally saved it and invested it long term on the financial markets through a diversified allocation. Knowing I would use these savings in the context of a real estate acquisition in the next 5-10y, I did not have a very long investment horizon and thus invested with an allocation of 30-35% Equities.

I did offer myself a nice watch (2.5k, not going after 10+k watches for the time being) as well as new clothes for a total of 2.5K. Planned great vacations ahead, not luxury but atypical and looked for great experiences : helicopter flying courses, art courses.

I know it will sound counterintuitive to this forum but I mostly do not see the point of a MBA if you are in a good graduate program which leads to Associate without going to a MBA. Save yourself the money, learn online, read great HBS books and focus on your professional network and the quality of your personal relationships. This is the most difficult part to master.

Good luck -

Feb 16, 2016 - 8:38am

Really nice awnser LKM, thank you very much!!

Thinking a little bit more, I'll probably diversify between:
- buying some minor stuff; (10%)
- upgrade my vacations with some experiences (I liked the ones you put up there); (10%)
- save for some stuff in the future; (40%)
- start a NGO or entepreneuship project; (40%)

I believe that will make me feel that I am enjoying the money but not just spend recklessly as a compulsory buyer.

Feb 16, 2016 - 11:58am
realjackryan:

You can donate it.

Thats not the intention realjackryan.

I want to take advantage of the money although in a smart way, not just flushing into consumer products or just saving for 'future projects' that I still do not have.

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Feb 20, 2016 - 8:53pm

seriously, use it to buy a portfolio of 4-5 stocks, and trade the portfolio a few times a week. You cannot possibly imagine the thrill of watching a price chart tick when you have serious money on the line.

Use both a daily and a 4hour chart, and put a bollinger band on those charts to help you decide when to buy and when to sell (using limit orders). If done well, in a year you may be able to DOUBLE the $$.

Feb 22, 2016 - 12:41pm
ironnchef:

seriously, use it to buy a portfolio of 4-5 stocks, and trade the portfolio a few times a week. You cannot possibly imagine the thrill of watching a price chart tick when you have serious money on the line.

Use both a daily and a 4hour chart, and put a bollinger band on those charts to help you decide when to buy and when to sell (using limit orders). If done well, in a year you may be able to DOUBLE the $$.


Haha thank you @ironchef. I may give a chance on that with a part of the money.
Feb 25, 2016 - 12:00pm
FutureTrader21:

Hey Tulio
Don't just invest to invest, be smart if you can't find where to put your money just hold it.
The suit....is key, no one likes to look at a schmuck.

Good luck!


You are right. I decided to break like this:
  • buying some minor stuff; (10%)
  • upgrade my vacations with some experiences (I liked the ones you put up there); (10%)
  • save for some stuff in the future; (50%)
  • start a NGO or entepreneuship project; (30%)

The suit will be included in the 10% (!)

Feb 25, 2016 - 12:01pm

How do you allocate your bonus? (Originally Posted: 09/12/2015)

I'll be receiving my first bonus at the end of the year. Just wondering how people who have been receiving massive bonuses for years allocate theirs?

I figured I would put about 50% into IRA/401k accounts, 25% in my personal portfolio, 15% on a big gift (maybe), and the remaining 10% just in my checking account. Certainly open to better ideas from more experienced people.

Thank you in advance.

Feb 25, 2016 - 12:02pm

Next year's bonus:
1) Max out 401k
2) car repairs without the wife noticing
3) new shotgun
4) balance on mortgage

Double Doubler
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Feb 25, 2016 - 12:43pm

Seriously. I want to own my home, I want to reduce the risk my family is currently exposed to because of the mortgage, and most of all, I want to reduce my family's economic consumption. The best way to do that is to pay off the mortgage; it's a tangible goal that brings with it a mortgage free lifestyle. That's an argument my COO (my wife) can understand and support.

Staying leveraged and investing the difference in an Index fund, aside from the fact that it takes an incredible amount of discipline not to blow the money on a Mercedes, is a pie in the sky idea that I have a hard time getting my COO to buy into. I may be a finance guy, but I'm still a pragmatist.

Besides, I also have a HELOC on my house and can choose to releverage for the right business opportunity in a moment's notice.

Double Doubler
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Feb 25, 2016 - 12:44pm
Double Doubler:

Seriously. I want to own my home, I want to reduce the risk my family is currently exposed to because of the mortgage, and most of all, I want to reduce my family's economic consumption. The best way to do that is to pay off the mortgage; it's a tangible goal that brings with it a mortgage free lifestyle. That's an argument my COO (my wife) can understand and support.

Staying leveraged and investing the difference in an Index fund, aside from the fact that it takes an incredible amount of discipline not to blow the money on a Mercedes, is a pie in the sky idea that I have a hard time getting my COO to buy into. I may be a finance guy, but I'm still a pragmatist.

Besides, I also have a HELOC on my house and can choose to releverage for the right business opportunity in a moment's notice.

How does paying off debt decrease risk? Personally I'd rather have cash.

However, it sounds more like you understand it's not the best decision but just can't convince your COO and/or don't have the willpower to simply leave the money as cash or some other short term investment.

That's a different story, I just assumed people in finance made good financial decisions. You seem to understand your won't and therefore pay down historically low debt. To each their own. Feel free to throw some more MS at me for the truth.

Feb 25, 2016 - 12:46pm

For the record, I didn't MS any of your posts but am glad to see I'm not alone in my thoughts. And in case you didn't read the end of my last post, I have a HELOC, and thus still have cash available for a rainy day or the right opportunity, should it arise.

But in order to bring this conversation somewhere productive, could you explain what you would do?

Double Doubler
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Feb 25, 2016 - 12:49pm
Double Doubler:

For the record, I didn't MS any of your posts but am glad to see I'm not alone in my thoughts. And in case you didn't read the end of my last post, I have a HELOC, and thus still have cash available for a rainy day or the right opportunity, should it arise.

But in order to bring this conversation somewhere productive, could you explain what you would do?

First off, I'm sorry for being a dick, this is my personal soap box because I live in the south and am Christian so Dave Ramsey permeates my friends lives, causing good working class people who have little/no exposure to the market to plow extra cash into 3% loans, costing them somewhere between $200k-$500k. Not an excuse just to help you understand why I get so passionate

Okay that being said, I love that you have a HELOC to re-lever, however we all know interest rates are going up and as stvr2013 noted, it's a big difference between 4% and 6% or even 5%. So a HELOC that is going to raise with rates really doesn't have the same appeal to me as a fixed rate 30 year 4% mortgage.

I get that many people who's jobs are closely tied to the market may shy away from simply dropping the money in an index fund, but aren't there many other ways to generate returns that are less risky? I mean, I saw a 2% 60 month CD ad the other day. If someone is really worried about the market, wouldn't you jump at that? Especially on a primary mortgage where you're paying 2.5%ish or 3%, that seems like an amazing hedge for the market. Then if the market tanks 20% and you get fired you have an amazing buying opportunity.

Bad debt is bad. Good debt is amazing. 2.5-3% debt is out of this world. I personally did a cash out refi when my house value went up and earned $20k in a month buying on a dip, plus I had the cash to buy a house when we moved without selling the old one. Flexibility for the win, cash for the win.

Feb 25, 2016 - 12:51pm

Apology happily accepted.

I still am not sure I follow. Assuming my mortgage rate is a fixed 5yr at 3% for simplicity. Why would I borrow money at 3% to invest money at 2% in a 5-yr CD? I'd be taking a 1% loss.

It's interesting you say that "we all know interest rates are rising", but do we really? In Canada it's a little unclear. Anyways, I agree borrowing at 6% is less attractive, but that's besides my point.

Double Doubler
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Feb 25, 2016 - 12:54pm
Double Doubler:

Apology happily accepted.

I still am not sure I follow. Assuming my mortgage rate is a fixed 5yr at 3% for simplicity. Why would I borrow money at 3% to invest money at 2% in a 5-yr CD? I'd be taking a 1% loss.

It's interesting you say that "we all know interest rates are rising", but do we really? In Canada it's a little unclear. Anyways, I agree borrowing at 6% is less attractive, but that's besides my point.

Assuming you're in the 28-35% tax bracket, the government subsidizes 1% so you're actually at 2%. Depending on the CD terms I'd much rather have the cash in a CD than in my house. If I need that cash I'm still only paying 2% on it whereas with a HELOC you're not at 2% probably what 3.5ish? And that's variable instead of fixed.

So to me that offers way more flexibility, less risk, no change in return. That's pretty awesome, no?

Now, personally my risk tolerance is high so I'll throw that money in the market and make 6-10% but I understand that some people don't want to do that.

Feb 25, 2016 - 12:45pm

I'm all about maximizing my returns (have significant loans at ~3% but choose to invest in my fund), but not everyone has the same financial goals / risk appetite. Also, if you're in finance, you should know that a guaranteed 4% return isn't exactly easy to come by in this market. Clearly not a bad financial decision, especially if he has other lifestyle preferences.

Feb 25, 2016 - 12:47pm
stvr2013:

I'm all about maximizing my returns (have significant loans at ~3% but choose to invest in my fund), but not everyone has the same financial goals / risk appetite. Also, if you're in finance, you should know that a guaranteed 4% return isn't exactly easy to come by in this market. Clearly not a bad financial decision, especially if he has other lifestyle preferences.

I'm not in finance for the record, just an engineer who likes math, cash, and historically low interest rates.

Well first off, if it's a primary mortgage that's actually 2-2.5% assuming you make $150k+. If you can't make 3% returns in the market over 30 years then I literally can't even.

You hit the nail on the head..."other lifestyle preferences". What people really mean when they say "I want to live debt free" is "I want to have the least number of financial options available to me". There's a reason only 26/500 S&P companies were debt free (as of 2014). As a southern Christian, it's shocking to me how so many admire business people and want them to run the country but then won't run their personal finances the same way.

Feb 25, 2016 - 12:36pm

Thank you, great minds think alike! Maybe one day...140-048.

Feb 25, 2016 - 12:06pm

50% the tax man
Of the remainder:
50% savings towards house downpayment
20% personal investing account
20% vacation fund
10% general spending

Wouldn't you rather spread out your 401(k) investment throughout the year? Barring a big drop making things really cheap right when you happen to get your bonus. Unless you guys have far more options and are actively trading your 401(k) it seems like averaging throughout the year would make more sense than just a lump sum contribution.

Also do any of you consider putting some of that money into your fund rather than PA? I'm rather restricted in my personal trading so I would like to have money in the fund that I think will compound at a much better rate over time than the ETFs/mutual funds I can invest in with my PA. Obviously this would elevate my risk of tying my income and savings to the same entity though.

Feb 25, 2016 - 12:08pm

Use it on a Lotus Elise tho

Make Idaho a Semi-Target Again 2016 Not an alumnus of Idaho
Feb 25, 2016 - 12:13pm

It depends on how the inflation projections are looking for the next few years. Low inflation means bonus goes into income producing assets, high inflation means bonus gets spent/invested in the market. Never underestimate the power of inflation to murder your returns.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

Feb 25, 2016 - 12:15pm

What are your thoughts on investing it all in real estate for the income tax shield?

Are bonuses taxed at the 50% windfall rate in NYC?

"Everyone has a plan until they get punched in the face."
Feb 25, 2016 - 12:39pm

+SB thanks. I'd been wondering about that. I thought the shift to more base/less bonus would reduce the tax burden on analysts, but it makes sense that you'll pay a similar amount either way.

"Everyone has a plan until they get punched in the face."
Feb 25, 2016 - 12:19pm

1) Pay off all the debts and 2) Save all the remaining money. You need to save up as much as you can just in case: 1) you got fired, 2) want to move to another job or 3) take a break. You will feel a lot better knowing that you got a massive cash cushion. Many many years ago, a friend of mine lost his associate job at an investment bank, he ends up having to live on social security - until he found a new job (that took him a year in a very bad market condition). That is totally not cool. Save it up right now and you will thank yourself later.

Feb 25, 2016 - 12:25pm

You're forgetting about risk. As finance professionals, many of us are already extremely levered to the stock market, and our careers are extremely volatile. The day the market goes into free fall is the day we are most likely to get fired. If you didn't pay down debt and instead invested in stocks, you could end up still stuck with your debts and without the means to pay them back, given the reduced value of your assets. Given the risk involved in one's career, it's best to dial back leverage in one's personal capital structure.

Feb 25, 2016 - 12:29pm
IvyLeagueVet:

Totally w you on this. Actually I'm very surprised that many said to pay down debts.

This is a website of high finance pros that know the diff btwn return rates on a sizable bonus/capital and debt rates right?

Not all debt are created equal. I am surprised that such a high finance genius like yourself did not know that.
Pay down your student debt - rates are generally shit.
Take a mortgage at 0.01% fixed over 25 years - makes sense.

Feb 25, 2016 - 12:31pm

Of course they aren't. However, we're talking about student debt here which is usually less than 5%. Risk adjusted returns should net you more if you know what you're doing w your money.

Feb 25, 2016 - 12:33pm
IvyLeagueVet:

Of course they aren't. However, we're talking about student debt here which is usually less than 5%. Risk adjusted returns should net you more if you know what you're doing w your money.

https://studentaid.ed.gov/sa/types/loans/interest-rates
So let's assume a loan at 4.3% - your salary is taxed at 30 to 40% (NY for the win). This make your loan at gross 5.6 to 6%. If you had a killing bonus and decide to use your bonus strictly in the stock market in the goal of paying the interest payment you are looking at slightly below 5.6% gross return as capital gains tax is more like 20%.
If you can guarantee that you will earn 6% year after year in the market I will be more than happy to invest put money in you. Sadly I used to do sales for 8 years and I know that there are very few people who can average this return year after year and who did not just ride the market.

Moral of the story - pay back your student loans - this is the number 1 priority when you get a bonus. The rest can wait.

FYI - you really don't seem to know what you are doing with your money, so I would recommend you stick to paying your student loans.

Best Response
Feb 25, 2016 - 12:30pm
Iloveoptions:

My boss told me to spend it all on a vacation with friends in Saint-Tropez, which is what I did. Believe it or not, it is possible to spend an entire bonus in a week there.

Your boss wants you to be cash poor so he owns you. Can't believe you fell for it.

For someone who loves options, you just limited yours.

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Feb 25, 2016 - 12:32pm
rpc:

Bought a couple pieces of real furniture, the rest went into the PA. I prefer having the liquidity of my PA vs. 401k/IRA and only deposit what the Company will match in the 401k. Down payment, start a family, wedding, business venture, etc. in 10-15 years and want access to capital.

I agree with the PA > 401k mentality. Liquidity is very important. It can be very tough to get money out of your IRA until retirement unless you are a first time home buyer.

Learn to LOVE Trump in less than 3 minutes
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Feb 25, 2016 - 12:38pm

The tax implications of the 401k vs PA can be brutal unless your timeline is less than 10 years.

"Everyone has a plan until they get punched in the face."
Feb 25, 2016 - 12:40pm

-Max annual contribution to Roth IRA
-Some to vacation savings
-Some to a new bottle of scotch (or two or three)
-Some to general savings
-Some to general spending

"Successful investing is anticipating the anticipation of others". - John Maynard Keynes
Feb 25, 2016 - 12:48pm

This site is like an aspergers meeting ground or something.

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Feb 25, 2016 - 12:50pm

Given his job risk working at a HF and fact there can be huge swings in total comp, it's not a bad thing to pay off debt right now. We are not in the midst of a raging bull market right now so the opportunity cost is not as great. Sure you can buy the dip or index but there's an inherent risk working in this field and paying down debt / mortgage is a means to de-risk your future income.

While real estate may not have as attractive returns as the market, real estate is still an investment.

Feb 25, 2016 - 12:53pm

Tangentially related to this, how many people are contributing to IRA's? I saw a few people mention Roth IRA contributions for their bonus but that pretty much only applies to first year analysts before you surpass the income limits. Obviously you won't get the tax deduction on the traditional IRA either but 20+ years of tax deferred growth could still be pretty powerful with compounding. You lose the liquidity but it seems worth it, and it's only $5,500 a year which isn't a huge amount.

Feb 25, 2016 - 12:55pm

Saving your bonus (Originally Posted: 02/10/2011)

Question: for those who have been through bonus season, or preferably, who have been through a few, how much of your bonus have you been able to save.

Right now – I'm not scheduled to begin until summer – it seems doable to live off of the 70K salary and save all or most of your bonus. However, I've seldom herd of people finishing an analyst stint with 50-90K (after taxes) in the bank. Is it naive to think this can be saved?

Also, how does everyone budget, any tips? Do you save out of your salary or just the bonus – I assume that most banks match 401K contributions, correct?

Interested in hearing any advice on the subject – and please, just people who have actually received a bonus.

fdba Emory Blaine and BBA or otherwise trying to find the perfect pseudonym.
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Feb 25, 2016 - 12:58pm

75k will allow you to rent a place for $1500/month, get all your insurances, and put a couple hundred in your 401k. You will maybe save a bit each month but you tend to buy stuff like a watch or tv. Also, when you go out (which you will) you can easily spend 100-200 a night. You think crazy, well you will find out soon enough. You can save your bonus but tend to spend a bit of it on vacation trip or something nice.

Feb 25, 2016 - 1:00pm

dont worry models wont cost you anything because you have zero shot of dating on especially one your work schedule. Its the bottles that get you. Id suggest you befriend a promoter, saves a ton and easy to meet girls.

Feb 25, 2016 - 1:01pm

I max out my 401k each year. My 401k is mostly tied up in my firm's various investments and in a blend of mutual funds. My bonus goes to a new shiny toy (like an iPad or something I don't need), a new suit and sink the rest into a diversified mutual fund portfolio. I am toying with the idea of paying off my share of the rent in advance.

EDIT: for the record, I live in queens to save money.

"Dude, not trying to be a dick here, but your shop looks like a frontrunner for the cover of Better Boilerrooms & Chophouses or Bucketshop Quarterly." -Uncle Eddie
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Feb 25, 2016 - 1:02pm

no bonuses yet
Curious...how much money can you save if you don't drink alcohol? From what I understand, alcohol is a costly habit. Is it possible that if a person abstains from alcohol to save a noticeable amount of money($300+ a month)?

Greed is Good.
Feb 25, 2016 - 1:04pm

I've saved about $25k from my first year and that was spending pretty liberally ($2500/month in fixed expenses, $5k watch at bonus time, three new suits at $1500 each). Unless you're a big shopper or heavy coke user, you just don't have time as an analyst to spend a lot of money. Dinner is paid for 5 nights a week and then you get home and go to sleep.

Frankly, I don't even care about saving a ton, though. My eye is on earning potential, not saving wealth. Living frugally and saving an extra $10-15K is pretty meaningless in the grand scheme of things; I'd rather enjoy what little free time I have. God knows most 23-year olds do.

Feb 25, 2016 - 1:05pm

$5K watch? $1500 suits? More power to you for not caring I guess but I would be kicking myself so hard right now if I spent that kind of money at 23 on those things. I see that kind of stuff as a worthwhile purchase when it represents like 1-5% of my annual income. For example, if I am lucky enough to make associate, and make $225K my first full year, and all my b-school debt is paid by my last stub bonus, I can see treating myself to a Rolex or something, but making 120K a year in NYC with B-school in my future and I am assuming some undergrad debt you might have, that seems like a bad time to buy something like that.

To each his own though...

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Feb 25, 2016 - 1:06pm

I've gone through a few bonus cycles. I generally save 60-70%. I've definitely known a bunch of analysts/associates who go out and buy a nice watch with their bonus. Interestingly enough, most of the guys I work with are also pretty low key, despite getting pretty nice year end payouts.

For me, it's not really that appealing (i am a girl, after all). I spend enough money throughout the year on shopping and travel.

The way I see it, you have two options: 1) Save most of your bonus and don't save any of your paycheck. 2) Save more of your paycheck and squirrel more of your bonus away.

Feb 25, 2016 - 1:08pm

You're only young once, splurge it on models & bottels!
Pamper the girls and live life the easy way, you can think about saving later when you're a VP at the earliest.
Now is the time to buy a Patek Phillippe, and to borrow on your future income to buy a Porsche 911 Turbo.
Ever heard about borrowing enabling you to consume what you want, when you want it? It's all a matter of indifference curves.
So do the only rational thing and spend big.

Feb 25, 2016 - 1:09pm

Konig,

I would rather work for it than have it given to me. ;)

Feb 25, 2016 - 1:12pm

What are you all saving for? To me, the point of making a (relative) ton of money now isn't to retire "early" but to have an awesome life while you're still young enough to have fun. I don't want to be the 55-year old in a Porsche living out the dreams he should've lived out as a 30-year old. And guess what? I'll still have 60-75k in the bank after my two-year analyst stint.

Feb 25, 2016 - 1:13pm

Why do you guys wanna work in private equity and don't lever up yourself?
Spending that excess cash on toys, bottles & girls is the best way to keep yourself motivated. Think of yourself as your own manager. Here you have a principal agent problem. You will become lazy when you have a lot of cash in your 401k and stop working hard.
The smarter thing is to buy a really expensive watch (it better be loud!) that reminds you how hard you have to work to maintain your excessive life style. Then you bury yourself in debt to buy a nice Turbo, a dream appartment and a great house in the Hamptons. Also, you get a really hot and bitchy girlfriend (model) who whenever you come home reminds you of the nice things she has bought at Gucci today.
Fuck man, you will work hard and generate some kick-ass "return on life (ROL)".

Feb 25, 2016 - 1:16pm

The guy that lives in the penthouse in my building was living paycheck to paycheck and making bank, just got laid off and couldnt even join us at our table for the super bowl because he has absolutely no savings. I have a great time just don't see the need for a Porsche in downtown Chicago...I would rather have a fucking mazda that i own than a BMW that i'm still making payments on.

Feb 25, 2016 - 1:18pm

I plan to always have savings of at least 9-12 months of total living costs (rent, food, gym etc), and then have a seperate savings for stuff like retirement, childrens college. Until i have that saved up I live fairly frugally.

But I guess Im not one to judge life quality by the price of my watch and have no intentions on buying expensive cars/watches.

Living pay check to pay check is very risky in the case you lose your job, having living costs covered for the next year gives you a lot of freedom, and to me that is more valuable than any car.

Feb 25, 2016 - 1:23pm

I'm not looking – or expecting – to get rich off of an analyst stint – I whole heartedly believe in the "long-game" mentality – but was just curious if it is naive to think you can actually save your bonus, which people have said you can. Currently, I'm planning on spending all of my salary and saving my bonus. Honestly, and I am a pretty lose spender, it's not the smartest thing to spend everything you have, and I'll spare everyone the reasons why or a discussion on the future value of money! This is the budget I've been looking at (rent, electricity/gas and cable/internet are split over three people, payroll taxes are subtracted from after tax income, food is based on a $20 a day allowance):

                                Monthly     Bi Weekly   Weekly

Income After Taxes $4,130.7 $2,065.3 $1,032.7

Rent $1,500.0 $750.0 $375.0
Food $608.3 $304.2 $152.1
Electricity/Gas $100.0 $50.0 $25.0
Health Insurance $150.0 $75.0 $37.5
Payroll Tax $446.3 $223.1 $111.6
Phone Bill $80.0 $40.0 $20.0
Cable/Internet $33.3 $16.7 $8.3
Total Expenses $2,917.9 $1,459.0 $729.5

Income After Taxes $1,212.8 $606.4 $303.2
and Expenses

Regardless, I would be nice to not have to scramble after an analyst stint to afford a bag of Raman noodles your first semester in b school, or wait for your first paycheck at a PE shop to afford dinner, or be able to take a vacation after finishing your analyst stint or be able to comfortably begin as an associate without having to depend on a signing bonus, etc. etc.

fdba Emory Blaine and BBA or otherwise trying to find the perfect pseudonym.
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Feb 25, 2016 - 1:19pm

I max out my 401k. (Planning on using the cash to buy a house during B School, you avoid city taxes and avoid the 10% penalty . On top of that I'm not ridiculously frugal, but minimum $50k in the bank is doable for any analyst.

Feb 25, 2016 - 1:28pm

Put it to work via one or more P2P sites.

CNBC sucks

"This financial crisis is worse than a divorce. I've lost all my money, but the wife is still here." - Client after getting blown up

Feb 25, 2016 - 1:30pm

these types of posts are @"thebrofessor" favorite. Must include him

Don't imagine it will be large enough to get into some alternative funds, but there are some solid funds out there that can you those returns with decent risk/return. Also some funds that are in the P2P space if you aren't so inclined to do it yourself.

Array

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Feb 25, 2016 - 1:32pm

Limited partnership. Oil, real estate, etc.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."
Feb 25, 2016 - 1:33pm

If you truly don't know, then put it in the bank and let it sit there until you do know what YOU want to do with it. There is no rush to spend/invest money (you can always do that), and rushing such a decision usually isn't worth it. So build that emergency buffer as @"thebrofessor" says. Who knows what tomorrow will bring, you might get laid off, fired, sick, friend/family member may be in need, markets might tank (ie. buying opportunities) etc etc etc.

You may suddenly one day decide you want to go to grad school, travel, get a hooker, go on a bender, buy more property, donate it all, etc etc etc. And the money will be sitting there safely for you to use it then.

In other words, no need to rush into anything or force something that is not there.

Good Luck

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
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Feb 25, 2016 - 1:51pm

No stocks? Futures contracts on commodities it is

Then nothingness was not, nor existence. There was no air then, nor heavens beyond it. Who covered it? Where was it? In whose keeping? Was there then cosmic water, in depths unfathomed? -- Nasadiya Sukta
Feb 25, 2016 - 1:52pm

Trade UGAZ and DGAZ short-term

Don't fall for bullshit, especially your own.
Feb 25, 2016 - 1:55pm

put the money into the PE fund

Pennies from JcPenny
Feb 25, 2016 - 2:02pm

Take a few books and read a bit on Asset Management and uncorrelated assets (Yales unconventional portfolio).

Look towards risk parity strategies, target your volatility to generated the 6-7% you are talking about over a very long period of time with a volatility that you are happy with (since it was your first consideration)

Or you could just buy penny stocks, YOLO

Feb 25, 2016 - 2:03pm

Working in banking at a major BB, I've quickly come to realize that most bankers do a terrible job at investing their own money. I've had conversations with Directors and MD's who did not understand the mechanics of their own 401K and who couldn't tell the difference between Traditional vs. Roth.

In any case, don't listen to most of these bozos who are telling you what do buy. Anyone who mentioned real estate or bonds is tripping balls. Unless they correctly identified the fact that as an unsophisticated 20-something year old investor your only channel to those 2 asset classes are ETFs, these idiots have no clue what they are talking about. I am 99% confident that probably only 1% of WSO has ever dabbled in options/futures. I pretty much stopped reading as soon as i read "alternative investment fund".

I was going to do my usual troll thread about levering up and buying anything with a high expense ratio so you could painfully watch your hard-earned bonus erode, but it's almost Thanksgiving (practically Christmas) and so I am feeling a lot more charitable. As a few of the brighter ones on this forum have correctly identified, it would serve you well to dump 50-66% of your bonus on low cost ETFs. Stick to 2-3 domestic/international equity ETFs and don't be too afraid of going all equities here. Keep it simple. You should be thinking capital appreciation and not income. Use the rest to buy electronics, new clothes, or plan a vacation.

-MD NASTY

Feb 25, 2016 - 2:04pm

Working in banking at a major BB, I've quickly come to realize that most bankers do a terrible job at investing their own money. I've had conversations with Directors and MD's who did not understand the mechanics of their own 401K and who couldn't tell the difference between Traditional vs. Roth.

In any case, don't listen to most of these bozos who are telling you what do buy. Anyone who mentioned real estate or bonds is tripping balls. Unless they correctly identified the fact that as an unsophisticated 20-something year old investor your only channel to those 2 asset classes are ETFs, these idiots have no clue what they are talking about. I am 99% confident that probably only 1% of WSO has ever dabbled in options/futures. I pretty much stopped reading as soon as i read "alternative investment fund".

I was going to do my usual troll thread about levering up and buying anything with a high expense ratio so you could painfully watch your hard-earned bonus erode, but it's almost Thanksgiving (practically Christmas) and so I am feeling a lot more charitable. As a few of the brighter ones on this forum have correctly identified, it would serve you well to dump 50-66% of your bonus on low cost ETFs. Stick to 2-3 domestic/international equity ETFs and don't be too afraid of going all equities here. Keep it simple. You should be thinking capital appreciation and not income. Use the rest to buy electronics, new clothes, or plan a vacation.

-MD NASTY

Feb 25, 2016 - 2:07pm

Invest your money in an emerging market fund.

Wait I gonna check one for you.

Here, go and invest you bonus : Templeton Emerging Markets Bond A (Qdis) USD

Stay calm
Feb 25, 2016 - 2:14pm

Surprising no one mentioned a garage upgrade as another potential great way to spend that bonus, along with girls & watches…

As for the OP, if you're not keen on other asset classes than RE then it could be time to take some investing course or at least start reading. There are plenty of good books on the topic

Funny thread all the way, +1 @LCandB

Feb 25, 2016 - 2:15pm

Bonus to 401K - Reasons Not To? (Originally Posted: 06/16/2015)

In most cases (at least for me), annual bonuses are taxed at a higher rate than normal salary given the amount for that paycheck is grossed up (i.e. assumes you'll get that much from each paycheck for the year). From my understanding, the excess tax paid will be returned on the following year's tax return. This seems like a one-year interest-free loan I'm giving to the government, when I could be earning a return during that time.

To get around this, assuming I plan to max out my pre-tax 401K contribution ($18K currently) and it doesn't affect my company match, is there any reason to not just contribute the $18K from my bonus straight into 401K pre-tax? I wouldn't get the tax benefit of the deduction from normal salary each paycheck, but my regular income is taxed at a lower rate.

Let me know if I'm missing something / other things I should consider.

Feb 25, 2016 - 2:16pm

The reason your bonus is taxed at a higher rate is not because it's a bonus but because it increases your marginal. Whether you contribute your bonus or base to your 401k, your total income and thus tax liability would be identical, assuming you contribute the same amount of either your bonus or base salary.

Feb 25, 2016 - 2:17pm

You are looking at this too short term. Your annual take home is going to be the same post tax either way. From a time value of money perspective, you are actually better off putting it all into the year end bonus, not because of the marginal tax rate increase. What you've laid out is the right decision but for a slightly different rationale.

  • 1
Feb 25, 2016 - 2:18pm

If you put in all 18K you would be missing the company match for the rest of the year. I would suggest putting in 18K - Your annual contribution - Company Match every year. For example assuming 85K base and a 5% matching.

Annual 401k Contribution - 85K.05 = 4250
5% Matching - 85K
.05 = 4250
18K - 4250 - 4250 = 9500
Obviously you can tweak this to fit your base/company match but you get the idea, max out the amount your employer will match because that guarentees an instant 100% ROI.

Feb 25, 2016 - 2:19pm

Can't buy bottles or models with 401(k) savings, OP. Spend it all and help stimulate the economy.

Commercial Real Estate Developer

  • 2
Feb 25, 2016 - 2:23pm

Well I'm not in IB or on Wall St, so I haven't gotten a big bonus yet in my career, but I can say that after I got my first year-end bonus, I blew it in similar fashion.

Traveled to visit my friends from college on the weekends in a few weekends: 3 trips, about $600 airfare total, about $100 spending cash total (Since I visited my friends usually payed for the tab)

Significantly upgraded my wardrobe: A couple suits for $600 total, about $300 at Banana Republic, and about $300 at J Crew, Couple pairs of shoes from Jos A Bank for $200

Xbox360 and games: $500 total

My bonus was about 2k after tax, so I went a little bit over that, but since I'm young and have some savings, I could afford it.

Feb 25, 2016 - 2:25pm

Store a small portion of it if you don't have any savings built up. If you do -- hop on some planes and travel. Buy a nice gift for your girlfriend (you're about to fall off the face of the earth for two years). If you don't have one, purchase a nice big TV for your apt. Use the rest to improve your general lifestyle - nicer dinners, take taxi's instead of public transportation, few nicer clothes, etc.

I wouldn't recommend blowing it on a single large purchase. I know a guy who purchased a new BMW months in advance of receiving his bonus. When bonus time came, he regretted having to give it all back to the car dealership while the rest of us were able to blow the cash.

CompBanker

  • 2
Feb 25, 2016 - 2:31pm

.

One of those lights, slightly brighter than the rest, will be my wingtip passing over.
Feb 25, 2016 - 2:34pm

Pay off the ludicrous amount of debt accrued to this point?

Still not sure if I want to spend the next 30+ years grinding away in corporate finance and the WSO dream chase or look to have enough passive income to live simply and work minimally.
Feb 25, 2016 - 2:41pm

Bonus Paid Out...What Would You Do? (Originally Posted: 01/05/2016)

Below is a breakdown of my situation that just happened. I was pretty irate about the #, but eventually, or so I thought...

Scenario:
- Joined my bank about a year ago (early/mid Jan.) as a career switch. Company made no promise on my title (e.g. Analyst 1 2 or 3), and said it would be dependent on my performance, which is fair. Company is a boutique/lower MM firm and I could find 0 information regarding comp when I was interviewing. I had a feeling that being in the lower MM, it would be below street, but was hoping for something in the same ballpark.

We had our reviews in November, which went fine - some areas of improvements but nothing glaring and a "you're doing great work, keep up the good job" pitch. But when I found out the bonus, I was beyond upset- almost to the point of quitting on the spot. Barely broke 20% of our base which is already below street (and from what I've heard below previous years as well). It took a few days/weeks but I eventually got over it. Constantly reminding myself its about the experience, getting reps, and that it will help my "story"... basically trying to focus on the long-run vs. short-term gains. I still kind of believe that, but its getting difficult.

During break, I spoke with a colleague in my group that joined in the Spring, a few months after me. He mentioned he was pretty upset when he found out his bonus, but was much more upfront to the MD - asking him about promotion timeline, bonus tiers, etc. Essentially what he found out was that every analyst got the same bonus amount, regardless of start date. We have BS to me, and pretty demoralizing. I've lost a lot of trust for the higher ups in my group.

Maybe I need to stop being a bitch, that could be a fair assessment, but honestly just need outside perspective.

Feb 25, 2016 - 2:42pm

There is really no scenario that would justify a) giving all different tenured analysts same bonus b) bonus being 20% of below-street base c) throwing all analysts in the same (shit) bucket.

This place sounds like they don't give a shit about performance, because they don't compensate accordingly anyway. Odd, because my work product would definitely suffer if I knew I were to be compensated equally in any case.

Seems like they are fine with inevitable employee turnover and feed everyone the same "keep it up" BS to keep the game going. I would definitely look to lateral ASAP, especially now that you have 1 year and experience under your belt.

Feb 25, 2016 - 2:43pm

How are your analytics? If you are comfortable running DCFs, LBOs, Accretion/Dilution models, SOTP (Sum of The Parts from SCRATCH, start interviewing.

If your current firm has had you working more on pitch books and running models from a template, please beef up your skills prior to interviewing.

Susan
Feb 25, 2016 - 2:44pm

Alot of lower MM guys don't understand the value of a strong junior team, and thus don't know how to manage and incentivize one properly - hence why they're in the position they're in. No sense in just sitting around steamed about it though, get out and try to lateral somewhere.

Feb 25, 2016 - 2:45pm

What Would You Do With Your First Wall Street Bonus? (Originally Posted: 08/20/2012)

It's the end of August and if you work at Bank of America-Merrill Lynch you know what that means,...year end bonuses! By now I'm sure you've got a list a mile long to spend it on, like high fashion in sporting new Hugo Boss suits or more practically as a hardcore analyst, to further pay down your student loans thereby releasing future cash-flows which you will use to build your financial empire! Or you could just say, "to hell with it all," and blow it on a gambling habit in Vegas but before you make any plans you first better see how much you can expect to receive and some options…

Based on a Business Insider article on first year corporate and IB analyst bonuses from BAC-ML, I've added an economic twist in relation to my article, Want A Career On Wall Street, Plan On Moving From New York City by deflating their total NYC compensation to realize the differences in taxable income from second-tier WS venues. Here's a breakdown of the numbers...

1.) ML's base pay is $70K, which according to my source, is at the low end of the range for first year IB Analysts. Assuming this is in NYC dollars, here's its equivalent in the other cities:

• Durham, NC: $41,095.47
• Jacksonville, FL: $43,038.80
• Salt Lake City, UT: $43,010.74

2.) It was reported that this year's bonus range from $25K to $70K with the median being about $50K. Again, deflating this from NYC dollars you would have:

• Durham, NC: $29,353.90
• Jacksonville, FL: $30,072.00
• Salt Lake City, UT: $30,721.96

3.) Now, what matters to you monkeys is the latest total compensation figures as an analyst and here's how that $120K looks living outside of New York. Yes, living because these are only dollar amounts but if you adjust them against a cost of living index almost all major categorical expenses will be lower than living in NYC.

• Durham, NC: $70,449.37
• Jacksonville, FL: $73,110.80
• Salt Lake City, UT: $73,732.70

Well, that's my perspective on the matter but enough of the technical stuff. What we'd really like to know is if you are / want to be an IB Analyst...what are you expecting from your first bonus?

If you had a choice, which city would you spend it and what would you buy?

Who Am I? | See what GMngmt is all about at About.Me
  • 2
Feb 25, 2016 - 2:46pm

You do realize that analysts in other cities (aka Charlotte, Houston, etc) get paid the same as analysts in NYC for the most part. Thus, you shouldn't be deflating numbers to figure out comparable pay in regional cities, but rather inflating numbers. Good try though.

Feb 25, 2016 - 2:52pm

i would tithe, then i would allocate a small portion for fun purposes, then i would save the rest. i'd probably spend it in Texas, Houston metro area. or buy some hunting gear. of course, i still have one more year of undergrad. but it's good to dream! i'm really looking forward to graduating and getting out there.

"Everything comes to those who hustle while they wait." -Thomas Edison
Feb 25, 2016 - 2:51pm

btw, Houston was rated the best "city for your dollar" in a recent article, though I am not questioning GMngmt's methodology or anything. I believe it was in the Houston Business Journal if I am not mistaken. And with the Shale play/Fracking boom that's happening, there's plenty of opportunity to get in with some IB's or AM's or an energy analyst/ trading position. Houston is hot! and not just because it's August! of course I'm from there so I'm plenty biased in that regard...

"Everything comes to those who hustle while they wait." -Thomas Edison
  • 1
Feb 25, 2016 - 2:54pm

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"Everything comes to those who hustle while they wait." -Thomas Edison
Feb 25, 2016 - 2:59pm

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"Everything comes to those who hustle while they wait." -Thomas Edison
Feb 25, 2016 - 3:07pm

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