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2/8/16

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!!

Comments (361)

2/14/16

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 -

Financial Modeling

2/16/16

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.

2/16/16

You can donate it.

2/16/16
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.

2/18/16

Oh, Invest it.

2/20/16

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 $$.

2/22/16
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.

2/23/16

Save, Invest, buy a real suit.

2/24/16
FutureTrader21:

Save, Invest, buy a real suit.

Thx FutureTrader.. those will be under my priorities!

2/25/16

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!

2/25/16
FutureTrader21:

Hey TulioDon'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% (!)

2/25/16

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

Double Doubler

2/25/16
Double Doubler:

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

You're going to pay off 4% debt and you're in finance? Seriously?

2/25/16

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

2/25/16
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.

2/25/16

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

2/25/16
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.

2/25/16

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

2/25/16
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.

2/25/16

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.

2/25/16
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.

2/25/16

Whatever you do, for now, avoid putting any of it into an ETF, mutual fund, or putting it to use in some broad market strategy.

2/25/16

A. Lange & Sohne...

2/25/16
shortstack:

A. Lange & Sohne...

You have impeccable taste my friend! What reference?

2/25/16

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

2/25/16
  1. Max out 401k
  2. Moved the rest to fidelity for investing
2/25/16

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.

2/25/16

I'm a big fan of plowing it back into my fund. My fund's pretty old and well-established so I don't think there's a ton of elevated risk by tying my income / savings together. Even if there is, I'm young - I'll survive.

2/25/16

Company maxes out the 401k contribution (unless that doesn't count correct me if I am wrong).

Bought a place with last years bonus.

A small chunk is going to a vacation the rest is going to go towards investments.

2/25/16

Use it on a Lotus Elise tho

Make Idaho a Semi-Target Again 2016
Not an alumnus of Idaho

2/25/16

bottles and models ;)

2/25/16

Pay down some debt....

Greed is Good!

2/25/16
  1. Payoff my crippling credit card debt
  2. Go to the titter
  3. Bank of Hellman's
2/25/16

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

2/25/16

.

2/25/16

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."

2/25/16

Pretty old myth. You get it back in your tax return.

http://www.thestreet.com/story/990258/1/when-the-t...

2/25/16

+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."

2/25/16

Max out retirement account from salary on a bi-weekly basis. For the most part live the lifestyle of my salary.

Bonus waterfall:
1) pay off student loans
2) balance held as cash for house deposit
2a) try to have 50-75% invested across asset classes, balance in cash depending on market

2/25/16

last year i bought a rental property in san diego which i think was a pretty good way of forcing me to save it. this year will probably need to pay down some student loans, and start saving for a down in this god awful silicon valley housing market... go away techies, nobody likes you.

2/25/16

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.

2/25/16
Harvey Halstein:

<

p>1) Pay off all the debts and 2) Save all the remaining money.

I debate about the debt paydown. I don't like having debt but with my student loans at ~3% it seems dumb to pay that down any faster than I have to.

2/25/16

Don't totally disagree with this logic. However, being debt free is pretty amazing. You are buying yourself freedom and there is a cost to that freedmen. I'm personally a fan of being able to walk away from any job because its not longer fun/interesting/education/lucrative/etc.

2/25/16

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?

2/25/16

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.

2/25/16
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.

2/25/16

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.

2/25/16
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-... 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.

2/25/16

Usually one gets a killer bonus BC its fund averages well over 6% YoY. You figure out the rest...

2/25/16

2013 bonus: Bought muscle car
2014 bonus: Repairs to muscle car after I smashed it up

2/25/16

Paying down debts wasnt as attractive when the market was up 15-30% / yr in a bullmarket for the last 5 years but if the mkt continues to be choppy, some people may want to make a larger than normal debt paydown here.
15-20% for spending / vacation for the year
50% into the fund
Sweep the rest to pay down student loans

2/25/16

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.

Best Response
2/25/16
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.

2/25/16

Okay John LeFevre...

2/25/16

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.

2/25/16
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:

2/25/16

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."

2/25/16

Save it for co-investment opportunities

2/25/16

-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

2/25/16

I skim off ~$2k for vacation and fun expenses

Max out Roth IRA/401K
Rest goes into brokerage account

2/25/16

This site is like an aspergers meeting ground or something.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!
MSFHQ

2/25/16

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.

2/25/16

This article seems to do a good job at explaining the average investor's options and I'd invite you to read it: http://www.mrmoneymustache.com/2012/02/24/pay-down...

Double Doubler

2/25/16

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.

Financial Modeling

2/25/16

No bonus season yet for me, but I would suggest clarifying where you're at. Being in NYC or Houston makes a big difference on how much you're going to be able to save.

2/25/16
nb84:

No bonus season yet for me, but I would suggest clarifying where you're at. Being in NYC or Houston makes a big difference on how much you're going to be able to save.

NYC.

fdba Emory Blaine and BBA or otherwise trying to find the perfect pseudonym.

2/25/16

What about models & bottles?

2/25/16

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.

2/25/16

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.

2/25/16

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

2/25/16

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.

2/25/16

it's definitely doable to save that much money through two years without breaking a sweat...depends on your lifestyle though obviously. but for me, hasn't been hard and i go out / eat out frequently

2/25/16

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.

2/25/16

$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...

2/25/16

[quote=jc100021]....b-school debt .... [quote]

AHAHAHAHAHA thank you Allah for the oil ! Scholarships from the Saudi government (paid in full, including room & board) include a monthly stipend ($2750 USD for undergraduate students, $4000 for grad students, +$1500 if your spouse is accompanying you, +$900 for each child that is accompanying you....best part: untaxable lol)

^trying to piss you off , as you can see

Greed is Good.

2/25/16
jc100021:

$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...

I'm lucky enough that I don't have undergrad debt and my father would likely pay for, or help me pay for B-School. (Which I may not even go to.)

Like I said, let's say I don't buy those watch or those suits. Really, how much does $10k matter in the grand scheme of things?

2/25/16

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.

2/25/16

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.

2/25/16

Konig,

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

2/25/16
jc100021:

Konig,

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

You work for it just like the National Merit Scholarship kids in the U.S., nothing different in the way you get it (albeit theyre more generous).

Greed is Good.

2/25/16

Fuck all this noise about earning potential...every grand i save equates to earlier retirement. Personaly rather keep adding to my etrade and 401K then buying a cool watch or car....

2/25/16

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.

2/25/16
milkman84:

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.

The difference between you and a lot of people in this thread is you have no idea the actual value of a dollar. I'm not meaning this in an asshole kind of way, but you have daddy to pay for all your shit, most people don't. $10k saved now and invested properly is worth a shit load more than $10k 30 years from now.

2/25/16

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)".

2/25/16
Il Cavaliere:

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)".

That's pretty much what our group head tells us. He encourages us to lever ourselves up, because, he says, "How are you going to deal with a product [debt] that you don't understand or have yourself?"

2/25/16

So far I've saved 100% of my bonuses to use as trading capital. Unfortunately I am rather loose with my base, I don't spend a ton on rent so have some discretionary income but it all gets wasted somehow.

2/25/16

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.

2/25/16

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.

2/25/16

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.

2/25/16

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.

2/25/16

Of you could just not go to business school, not a requirement...

2/25/16

TimRay, are you saying you did that or its possible?

2/25/16

You should probably just give your bonus to me - that way you don't have to make any difficult choices on how to use it.

2/25/16

+1.

2/25/16

+1.

2/25/16

Making me laugh after wanting to punch a hole in my wall when I saw my y/e bonus - a silver banana for you

"Go for a business that any idiot can run - because sooner or later, any idiot is probably going to run it." - Peter Lynch

2/25/16

You can always buy bonds.

2/25/16

Bonds, stock, and real estate are the biggest three, but since it sounds like you don't want to do any of those, I'd just put it in your mattress.

2/25/16

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

2/25/16

buy gold bullion. it's on sale.

2/25/16

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.

2/25/16

Thanks bro but I hate these threads with a fiery passion. I created a thread that addresses any question like this, but it's lost beind 100 pages of GS fluffer vs ms janitor vs saks fo sales. Also because it's always the usual suspects in these threads. Janky says gold, dingdong says strippers, fuld says low cost etfs, other users give specific names, and I want to blow my brains out. People wonder why this country has people who are so idiotic when it comes to personal finance, threads like this do NOT help.

Op, in short: emergency fund first and foremost. Then do whatever, have some fun, go golf in Torrey pines, go to Toronto and get a high class hooker, go to Vegas on a bender, whatever, just don't listen to stock tips from strangers without doing your own due dili

"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

"The investor's chief problem - and even his worst enemy - is likely to be himself." - Benjamin Graham

2/25/16

thebrofessor:

Thanks bro but I hate these threads with a fiery passion. I created a thread that addresses any question like this, but it's lost beind 100 pages of GS fluffer vs ms janitor vs saks fo sales. Also because it's always the usual suspects in these threads. Janky says gold, dingdong says strippers, fuld says low cost etfs, other users give specific names, and I want to blow my brains out. People wonder why this country has people who are so idiotic when it comes to personal finance, threads like this do NOT help.

Op, in short: emergency fund first and foremost. Then do whatever, have some fun, go golf in Torrey pines, go to Toronto and get a high class hooker, go to Vegas on a bender, whatever, just don't listen to stock tips from strangers without doing your own due dili

Strippers? Only for investors or people I'm trying to get to sell me their company. I don't really like giving women money to tease me. I'm much more apt to blow my money on expensive booze and food, in that order.

OP, can you invest in your firm's deals? Honestly that's where the vast percentage of my money is. It's locked up for years but I don't need it now and I trust my investing acumen more than I trust some mutual fund manager or the overall market. As everyone else says, have your emergency fund and some diversity but if you're in PE for the long haul I like seeing where my money's going and having a say in it (maybe not at the analyst level) and you should accumulate some decent wealth along the way. The IRR's aren't bad in PE in general.

2/25/16

Dingdong08:

thebrofessor:

Thanks bro but I hate these threads with a fiery passion. I created a thread that addresses any question like this, but it's lost beind 100 pages of GS fluffer vs ms janitor vs saks fo sales. Also because it's always the usual suspects in these threads. Janky says gold, dingdong says strippers, fuld says low cost etfs, other users give specific names, and I want to blow my brains out. People wonder why this country has people who are so idiotic when it comes to personal finance, threads like this do NOT help.

Op, in short: emergency fund first and foremost. Then do whatever, have some fun, go golf in Torrey pines, go to Toronto and get a high class hooker, go to Vegas on a bender, whatever, just don't listen to stock tips from strangers without doing your own due dili

Strippers? Only for investors or people I'm trying to get to sell me their company. I don't really like giving women money to tease me. I'm much more apt to blow my money on expensive booze and food, in that order.

OP, can you invest in your firm's deals? Honestly that's where the vast percentage of my money is. It's locked up for years but I don't need it now and I trust my investing acumen more than I trust some mutual fund manager or the overall market. As everyone else says, have your emergency fund and some diversity but if you're in PE for the long haul I like seeing where my money's going and having a say in it (maybe not at the analyst level) and you should accumulate some decent wealth along the way. The IRR's aren't bad in PE in general.


@thebrofessor

WTF? I was going with hookers and blow this time. I like to give tailored advice, not just the same advice to every person. I guess I've become predictable at saying buy the boring index funds, so hookers and blow it is.

PS -- Strippers are never a good option, I don't like to load the chamber with nowhere to shoot it.

2/25/16

You and I both know that strippers are just hookers with W2 income

"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

"The investor's chief problem - and even his worst enemy - is likely to be himself." - Benjamin Graham

2/25/16

I got exactly what I wanted. A perfect recap of every one of these threads for everyone to use from now on. You will never have to get involved with one of these again. You're welcome man

2/25/16

lol, well said

WSO's COO (Chief Operating Orangutan) | My story | My Linkedin

2/25/16

Limited partnership. Oil, real estate, etc.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."

2/25/16

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.

2/25/16

Lending Club

2/25/16

Semi-Socratic:

Lending Club


I love LC. I'd be a liar if I said I wasn't leveraged out the wahzoo on LC. I've been getting good returns thus far.
2/25/16

Doesn't a 700+ credit score equate to like a 6% interest rate? What are you able to borrow at?

2/25/16

SGsprinks:

Doesn't a 700+ credit score equate to like a 6% interest rate? What are you able to borrow at?

0 percent with no payments until 2017 then 6% (I think) after that. Take a guess where the capital source is.

People said it was stupid but I'm all over the account and I use an API to auto invest along side HF's who would normally nab all the good loans.

I've been doing it for the past year or so and I've had a great degree of success.

I just hope it doesn't blow up.

2/25/16

How do you not know what to do with your money? You got into the industry to make gobs of it, so if you don't know what to do with it, why stay?

2/25/16

Buy a Rolex

2/25/16

also I have a better question: why do you hate stocks? I know you said don't ask, but I don't care, that seems silly for someone in PE to not appreciate the growth potential of that part of the capital structure.

"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

"The investor's chief problem - and even his worst enemy - is likely to be himself." - Benjamin Graham

2/25/16

thebrofessor:

also I have a better question: why do you hate stocks? I know you said don't ask, but I don't care, that seems silly for someone in PE to not appreciate the growth potential of that part of the capital structure.


I have to agree here. I'm stocks only for the last few years and frankly don't understand why anyone wouldn't want a piece of the action given EVERYTHING went on sale a few years ago. Ratchet up the stops and have at it, strike while the iron is hot.

OP, you won't do stocks or RE and want minimum 6% growth in a low interest environment: what do you realistically think your options are in financial markets? If you're really hungry, find some startups and throw a few grand at each one.....if only one grows rapidly, then you're golden. Otherwise, perhaps revise your expectations to be more in line with reality.

Get busy living

2/25/16
2/25/16

Pay off your credit card debt if you have any. Guaranteed 18% (or whatever it is annualized now days) return from paying it off so you don't have to pay interest.

2/25/16

BDSM Escorts to punish you for posting another of these useless threads...

2/25/16

Lend money to ukraine, they will pay it off. I swear.

2/25/16

karypto:

Lend money to ukraine, they will pay it off. I swear.

Funny thing is that WSJ just had an article about a successful bond investor in CA I think that owns over 10% of Ukraine's bonds!

2/25/16

How about Argentina? I hear they're good for it.

"There's nothing you can do if you're too scared to try." - Nickel Creek

2/25/16

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

2/25/16

Trade UGAZ and DGAZ short-term

The good thing about science is that it's true whether or not you believe in it.

2/25/16

Real estate, hands down. Interest rates are so low right now, the first thing I'd do if I could afford to would be to buy income generating real estate, like a rent house or apartment complex.

2/25/16

FinanceGuy15:

Real estate, hands down. Interest rates are so low right now, the first thing I'd do if I could afford to would be to buy income generating real estate, like a rent house or apartment complex.

You're advocating leveraging yourself to the hilt for an illiquid, expensive and time consuming asset?

2/25/16

Tucked:

FinanceGuy15:

Real estate, hands down. Interest rates are so low right now, the first thing I'd do if I could afford to would be to buy income generating real estate, like a rent house or apartment complex.

You're advocating leveraging yourself to the hilt for an illiquid, expensive and time consuming asset?

For a revenue-generating asset? Of course. Also, depending on your bonus size, you wouldn't need to leverage yourself to the hilt. Just buy a smaller house in the right area, and rent it out. There are property managers that would do a majority of the rental collection for you for a percentage of the rent, and you just reap the cash. That's how plenty of wealthy people generate passive income.
If I had to take on debt, you better believe I'd only do it for appreciating, revenue generating assets. Especially when interest rates are so low.

2/25/16

MrLondon:

I already own a flat, and I dont want to buy more property just yet (anyway the size of the bonus wouldnt allow it)

Keep in mind he's a second year analyst and already ruled that out due to cost. It isn't an instant cash cow either.

2/25/16

FinanceGuy15:

Tucked:
FinanceGuy15:

Real estate, hands down. Interest rates are so low right now, the first thing I'd do if I could afford to would be to buy income generating real estate, like a rent house or apartment complex.

You're advocating leveraging yourself to the hilt for an illiquid, expensive and time consuming asset?

For a revenue-generating asset? Of course. Also, depending on your bonus size, you wouldn't need to leverage yourself to the hilt. Just buy a smaller house in the right area, and rent it out. There are property managers that would do a majority of the rental collection for you for a percentage of the rent, and you just reap the cash. That's how plenty of wealthy people generate passive income.

If I had to take on debt, you better believe I'd only do it for appreciating, revenue generating assets. Especially when interest rates are so low.

Because these types of properties are just so easy to find...interesting.

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

WSO is not your personal search function.

2/25/16

put the money into the PE fund

Pennies from JcPenny

2/25/16

Help me pay off my student loans, thanks.

2/25/16

don't buy bonds, buy rims. Shod your ride with some 24 inch spinners, it's gonna be dropping more panties than you can handle. Have a merry xmas.

2/25/16

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

2/25/16

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

2/25/16

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

2/25/16

hardooooooooo

2/25/16

MD_Nasty:

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.

They don't know the difference between a Roth and a traditional because at that level you don't make peanuts anymore; when you earn above a certain sum you can't invest in those. Roth and Traditional accounts are for poor people or fresh off the press analysts... Your MD knows the difference, but properly couldn't be bothered with you.

Back to OP - I see you live in London and you own your flat - if you leveraged you have already gotten a massive return on your investment, well done. Relax and sit back.
Stick to cash if you are worried of public equity. 6 and 7% involves a lot of risk. Everything is inflated at present, I keep my cash in the bank and I wait on the next bubble to deflate. It takes patience and is extremely frustrating when for the last 3 years everyone has been making bank in equity, and you are just holding your balls in your hands making less than 20bps in interest... Patience... Although hedge out and FX part of your cash in USD for when your time comes to BUY the market.

Somebody mentioned EM early on... Wait the fuck up for this. It's in a right old mess at the moment with Brazil, SA, Russia down the toilet with further room to go down.

2/25/16

puts in USO

"He profits most who serves best"

"Every failure brings with it the seed of an equivalent advantage"

*Mark 11:24

2/25/16

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

2/25/16

Since I live in London too and do not have a spare penny, I plan to earn some money and start trading, since you already have the money, why dont you trade for yourself if your job allows you to

2/25/16

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

2/25/16

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.

2/25/16

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.

2/25/16

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.

2/25/16

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

2/25/16
CRE:

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

And who said anything about retirement? THIS IS FINANCE! You do it until you die.