Who else lives way below their means?

It's sad that we're in one of the most lucrative industries and we still have to spend ~50% of our take home pay for a shoebox in Manhattan. Is anyone else here trying to save up for something, like a down payment on a home in the suburbs or early retirement? What are you doing financially to help achieve your goals? What are your spending habits like?

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Comments (103)

Jul 17, 2021 - 6:35pm

I spend my base and save my bonus every year. When I started as a first year one paycheck went directly to rent and the other I used for spending money/bills/food etc. With the raise in base/progression YoY I'm going to start putting monthly away now that one paycheck is bigger than the rent payment and hopefully build up a little downpayment for a property (not in the city).

Jul 23, 2021 - 10:49am

I second this, my parents were in the industry and they told me that they never spent their bonuses and lived like they only had a salary. As said here the raises in salary should begin to outweigh rent and lifestyle. My only datapoint against this is that I am in the midwest so the lifestyle dip was not as dramatic as NYC area.

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  • VP in IB-M&A
Jul 17, 2021 - 9:41pm

I probably saved a lot less than my peers through analyst/associate/VP. No regrets though. It's been a super fun and luxurious ride so far. Your comp ramps so quickly if you stay in IB, what feels like saving a lot as an analyst (e.g. your bonus) will feel immaterial for you soon enough. If you're an analyst spend everything, if you're an associate save half your bonus or something like that, if you're a VP and up then you probably have a mortgage by now anyway and that will dictate spending

  • Principal in PE - LBOs
Jul 17, 2021 - 11:29pm

I wholeheartedly agree with this. What's the point of making a lot of money working a million hours a week if you don't spend any of it? You'll have plenty of time to save money later in life, your twenties won't last too much longer.

  • Investment Manager in HF - Other
Jul 18, 2021 - 10:08am

I'm more in this boat, you need some balance. I'm in my mid 30's and I could have retired by now had I lived an extremely frugal life, but I also enjoy working. I would have missed out on many fun trips and experiences, as well as just a very comfortable life (nice apt, etc). Meanwhile a good of mine is 30 and has ~$6mm saved (has been very successful and very frugal) and still refuses to buy first/business tickets on international flights or spend on other luxuries. 

I don't think you should live to the point where money stresses you (have definitely been guilty of that) but just realize what type of person you are (do you want to work in an industry like this, what makes you happy, etc) and live the way that'll make you happy. 

  • Intern in IB - Gen
Jul 20, 2021 - 11:16am

MMs, BBs, and/or EBs have offices in LCOL places like Minneapolis, Atlanta, Little Rock, Milwaukee, Jacksonville, and Cleveland.

Jul 17, 2021 - 11:08pm

Ok soo i have trolled a considerable amount on WSO. Tbh only 1 post i made (my first) was serious. But i can 100% tell you about an insane maniac living below his means, my brother. He is a high level quant at citadel and runs a book. He lives in a closet for 600 a month (he would have gone cheaper but my dad didn't want him in the ghetto) and Sleeps on the floor, walks to work, and wears casual- business casual clothes all from like Kirkland or something of that caliber. Kid is 22 and makes more than anyone I've seen in this thread that isn't lying and saves 94% of his annual income no joke.

Jul 18, 2021 - 4:32am

Where are you living for 50% of take home? Most I've seen people go is like 2.5k per month for rent and idk any analyst getting 60k after taxes

Array

  • Analyst 1 in IB - Cov
Jul 20, 2021 - 7:24pm

60k take home is v normal back on the 85k base. Assuming you contribute up to the employer 401k match your pre tax base is more like 80-82 which comes out to 58-60 post tax

  • Associate 1 in S&T - Other
Jul 18, 2021 - 9:44am

I've always thought living on your base and banking your bonus was pretty excessive. When I started, I was saving at least a third of post-tax money. Now, I'm saving quite a bit more, especially with pay bumps. Once you play around with some retirement calculators, it's hard not to be very aggressive with saving / investing. After just a few years of this, even if I never save another dollar, I think the nest egg should grow into a pretty nice chunk by retirement. I remember one VP mention he probably spent $100k on ubers, take out, and drinks in a year. That alone could be like $5 - 10mm in retirement

Jul 18, 2021 - 10:17am

In my first year as an IB analyst, when I made say around $140k (mind you this is over 10+ years ago), I think I spent less than $5k. I was living at home. Had no time to spend money and the odd beer was on company credit card.

Fast forward a little over 10 years now, I make millions pa (no longer in corporate finance, but still finance), I probably spend $90k pa on living expenses (I own my own home).

  • Associate 2 in PE - LBOs
Jul 18, 2021 - 11:29am

>50% save rate on base, bank full bonus. Theoretically have carry as well but discount as 0

I don't see why you need to splurge just to splurge. Just live the life you want to live and just be a bit more luxurious than your peers. I never think about spending money and just do what I want, have no qualms about shelling out for e.g. nice holidays I want to go on. But whats the fun in doing all this expensive shit alone. I'm not materialistic so no desire to buy expensive things - might be different for others. 

Jul 19, 2021 - 7:58am

If you don't want to enjoy the materialistic things why haven't you lateraled to a role with lower hours and lower comp?

Array

Jul 18, 2021 - 12:39pm

Lots of interesting tales here. Realize that saving a significant amount of money as an analyst in NYC can be challenging. I think the best general advice for someone starting out would be to "save as much as you possibly can". Each situation is different, but there is no reason a 1st year shouldn't be able to max out their 401k.

I work in a product group at a BB in a LCOL city. I just went A2A and once my bonus hits in August I'll have a net worth of $750k. Im 27 (didn't break into analyst role until I was 25) but worked at my bank full time starting at age 19 in back office role while doing undergrad.

I used to think I was going to do "FIRE" but honestly am not attracted to that anymore. The feeling of working hard, achieving things, and being compensated for doing so feels too good. Right now I'd say my goal is simple to just get rich. Will hit $1mm net worth by 28 and would love to hit $2mm by 30.

Jul 18, 2021 - 3:02pm

I did love at home through UG so that did help. Also my first two years of college were done at a community college, which they did pay for (12k all in).

I worked all through high school and graduated with like $10k saved, and also started investing in mutual funds when I was 17/18.

My comp progressed from roughly 60k from 19-22, then 85k from 23-25 (moved into a credit analyst role) and then have been in product group since then and just finished my 2nd analyst year.

I don't calculate my savings rate but it is probably somewhere between 65-70%. LCOL helps a lot with this, also live with my fiancé so that helps reduce expenses as well.

  • Associate 1 in S&T - Other
Jul 20, 2021 - 8:28am

Nice man, that's great stuff. Even just hitting 1mm by 30 would put you in a great spot. That's my shorter term goal. Considering grad school tho which would throw a wrench in that plan lol

Jul 18, 2021 - 12:44pm

I save about 75% of my base+bonus post tax. I live at home with parents w/ my spouse since the pandemic started and have been spending money only on trips/restaurants/dates with the wife.

My parents have a huge property and we're just crashing in the suburbs in their guest house instead of paying for Manhattan rent.

Jul 18, 2021 - 3:18pm

I like the burbs and a garden and less noise. Saving for a property in the burbs right now. The sooner I get out of the city the better. All that fucking noise and people, fuck that shit. 

If my finances don't suck the next couple of years I'd like to own an small apartment in the city center and mainly live in the burbs. Ideal scenario would be to buy a business property near where I live, build it up and move everything there so that I don't have to commute like a peasant. Imagine riding the bicycle to work along a river or some shit for 15 minutes each morning. 

I'm from Europe 

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Jul 18, 2021 - 8:16pm

Join us out in the burbs. Sysco food, nosy neighbors, and competing on coverage, quality, color depth, and nutrition of your postage stamp lawn. Also enjoy the one hour commute to go 6 miles. Starting to flip back the other way for me right now...kinda rather go back into the city. 

Note: I'm not in NYC, but very similar conditions. 

  • Investment Manager in HF - Other
Jul 18, 2021 - 8:23pm

The grass is always greener. Clearly will depend on the type of person you are and what you enjoy (lots of space? Ability to drive anywhere? Etc). Having done both, I much prefer the city, and find that things in the suburbs take much longer; you have to drive to everything and traffic can be awful. I appreciate the convenience of being able to walk to just about anything I want. It's probably helpful that I'm later in my career so I can also afford a nice place and many of the conveniences. 

Jul 19, 2021 - 6:14pm

The better question would be: If vagina and sex weren't affected by it, how many men would live in a dumpster? 

Seeing as I will predict the average age of WSO is around 26-27 making ~$225k with good career trajectory, an appropriate budget would be something like $3k for a studio of $3.5k for a 1 bedroom in a fun neighborhood. 

Now... if it were guranteed to not affect your sexual market value or sex life... how many of us would be willing to live for $1500 with a bunch of other guys in a early 30's style frat house? I bet a lot of us would. 

My $3k sectional sofa would suddenly turn into a $50 craigslist cum stained couch that I picked up from some bros at View34.

We're not lawyers. We're investment bankers. We didn't go to Harvard. We Went to Wharton!
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  • Analyst 2 in IB - DCM
Jul 19, 2021 - 7:43pm

Yeah, as a woman it's pretty pathetic how men revolve everything they do around sex. And then they have the nerve to say that "wOmEn nEeD uS" 🙄🤡 like nah, your value goes up when you fuck us, ours doesnt. 
 

Worst thing about this industry is all of the shallow, sexist men who view women as sex objects to prove their "success". 

Jul 19, 2021 - 7:54pm

"A great man once said, everything is about sex. Except sex. Sex is about power" - Frank Underwood

We're not lawyers. We're investment bankers. We didn't go to Harvard. We Went to Wharton!
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  • Analyst 2 in IB - Cov
Jul 20, 2021 - 7:26pm

I really do have to agree with this.  If you are not getting women prior to going home have a great home is not going to help you. People think that a great career is going to help you get laid.  The truth is it is probably going to drive more people away than not, if you are working 80 hour weeks.    

Jul 19, 2021 - 6:45pm

I invest almost all of my income. Owning a lot of things is really stressful IMO. I don't want to worry about taking care of a bunch of nice things...it becomes work in and of itself.

  • Analyst 2 in IB - Cov
Jul 20, 2021 - 7:31pm

The only thing I own a lot of is books. When I move I usually end up giving a lot of them to the local library

  • VP in PE - Other
Jul 19, 2021 - 10:12pm

For me, it's all about time value of money. A dollar today is worth way more than a dollar in the future. So yes, it would have been nice to spend a little bit more in my 20s, but those early dollars I saved/invested when I was in my 20s have really put me in a solid position in my 30s. I've never been a fan of the spend your salary, save your bonus mantra - maybe I'm more of a pessimist in this regard, but I always assume the downside will happen (boss will shaft you and your bonus ends up being low).

So I've saved a portion of my salary (20%+) and invested practically all my bonus (85%+). Have been doing this for 10+ years and plan to continue doing so even now. Really want the compounding effect to put me in a good spot for the future so I'm sacrificing a bit of today for the future.

  • Analyst 2 in IB - Cov
Jul 20, 2021 - 7:32pm

How did you balance spending with saving?  

For example I am saving about 40% of my bas salary but sometimes I feel like I am restricting my life.  

  • VP in PE - Other
Jul 20, 2021 - 8:16pm

The first 3 years were the hardest for me - I was an IB analyst in NYC and comp was a lot different then than it is now. Even so, I focused on maxing out my 401k even as a first year analyst. Lived with a couple of roommates that first year and spent close to $1,300 on rent. That first year was truly a grimy experience, but I still had a ton of fun hanging out with friends and enjoying the city. It just meant I wasn't going to clubs and doing bottle service, which isn't for me anyway.

After that I still kept rent in the $1,500-$1,900 ballpark my 2nd and 3rd years. 

I think rent is the big factor here. If you can somehow keep that down then it affords you a lot more options on discretionary spending. I lived a very frugal lifestyle as an analyst (and still do to some degree on the buyside), but I don't think it restricted my life at all. I had a ton of fun and hung out with friends, went to bars, played casual sports, etc. I made it a point to do stuff. 40% savings of base is a big %, but I believe all the dollars you can save/invest from 22-25 pay huge dividends as you go along. Yes, your comp can increase dramatically as you get older, but it's cool to see that those early dollars I put in at 22 actually net me close to what I save through annual CF now. 

  • Associate 1 in IB-M&A
Jul 19, 2021 - 10:49pm

Going to offer a different take here. For me it was always important to see why I'm putting up with the stress and hours of banking, and living uncomfortably just to see growing numbers in a bank account wasn't it. As an analyst I had my own studio with a 5 minute walk to the office, ordered out, and took Ubers instead of the subway. I didn't do anything lavish or frivolously throw money away, but a comfortable lifestyle outside of work was way more of a motivator for me to keep grinding, than growing my savings/brokerage account. 

Today my girlfriend and I have a 2-bedroom in a very nice building, which judging by the rent people quote on this forum, would probably be considered unnecessary. I have the means to furnish my apartment well, travel comfortably, take my girl out for nice dinners, and make big-ticket purchases when needed without thinking twice. I still save/invest around 1/2 of my bonus every year and a few hundred dollars of salary a month, so I won't be in trouble if I lose my income. But the lifestyle I'm able to maintain is worth way more to me. Since my goal is to stay in finance (investment banking or otherwise), I feel like the money will come and the incremental savings from my junior years will be a small fraction of what I can put away in the coming years.

  • Analyst 1 in IB - Gen
Jul 20, 2021 - 9:07am

A comfortable lifestyle outside of work was way more of a motivator for me to keep grinding, than growing my savings/brokerage account. 

This, I couldn't agree more. The best investment in your junior years is yourself, not your savings account. Treat yourself, don't save all your available income. That extra k spent on holidays/big night out/whatever will cheer you up and make your life more bearable. 

Just ask your MD if he'd rather have an additional bathroom in his mansion or the opportunity to go back and enjoy his 20's. 

  • Analyst 2 in IB - Cov
Jul 20, 2021 - 7:35pm

A comfortable lifestyle outside of work was way more of a motivator for me to keep grinding, than growing my savings/brokerage account. 

This, I couldn't agree more. The best investment in your junior years is yourself, not your savings account. Treat yourself, don't save all your available income. That extra k spent on holidays/big night out/whatever will cheer you up and make your life more bearable. 

Just ask your MD if he'd rather have an additional bathroom in his mansion or the opportunity to go back and enjoy his 20's. 

Agree with you on the first half.  I bought a plane ticket to go watch a friend race without thinking twice about it. But, I don't think you can say the extra bathroom thing is a real comparison for most people.

  • Analyst 1 in S&T - Equities
Jul 20, 2021 - 9:17am

Couldn't have said it better…I'm an IBD associate and have been living like that since I was able to. I guess to each their own but I find it crazy where some of my acquaintances and others live in the name of saving money, talking about people who do well too.

Jul 21, 2021 - 12:24am

Going to offer a different take here. For me it was always important to see why I'm putting up with the stress and hours of banking, and living uncomfortably just to see growing numbers in a bank account wasn't it. As an analyst I had my own studio with a 5 minute walk to the office, ordered out, and took Ubers instead of the subway. I didn't do anything lavish or frivolously throw money away, but a comfortable lifestyle outside of work was way more of a motivator for me to keep grinding, than growing my savings/brokerage account. 

Today my girlfriend and I have a 2-bedroom in a very nice building, which judging by the rent people quote on this forum, would probably be considered unnecessary. I have the means to furnish my apartment well, travel comfortably, take my girl out for nice dinners, and make big-ticket purchases when needed without thinking twice. I still save/invest around 1/2 of my bonus every year and a few hundred dollars of salary a month, so I won't be in trouble if I lose my income. But the lifestyle I'm able to maintain is worth way more to me. Since my goal is to stay in finance (investment banking or otherwise), I feel like the money will come and the incremental savings from my junior years will be a small fraction of what I can put away in the coming years.

Literally why they call it the rat race, but to each his own

Array
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  • Analyst 2 in IB - Cov
Jul 20, 2021 - 7:37pm

Private condos are the way to go.  As long as you pay the mortgage, are a decent tenant and put a few extra bucks in their pockets they are the nicest people.

Jul 20, 2021 - 11:10am

Joined during COVID so WFH living with fam still. 25% 401K Roth contributions, started an LLC and some money goes there, and spend the rest outside of putting extra random dollars in my Marcus account. Not making crazy $$ as corpfin associate 2 (promo this month) but hanging out. Moving down to Manhattan in a few months (need a roommate shameless plug!) so I know that will all change. 

  • Analyst 2 in IB-M&A
Jul 20, 2021 - 4:05pm

I like to live comfortably. I don't think I'd make it far in IB if I didn't let myself spend money on things that would make my life better. I don't buy anything outrageous, but I save ~20% of my salary and half-two thirds of my bonus. Whenever I get a night off, I take my girlfriend out and not worry about money. When I can get away on a vacation, I'll buy tickets to a nice place / hotel for a weekend. I get nice clothes. I'm someone that doesn't need to make all the money in the world and retire by ~40. I like work, and yes I may ramp down when I get to 50-60, but I'll always have that income stream, along with 20% of my salary compounding. 

Jul 20, 2021 - 4:27pm

Ha, everyone does. I am sure nobody is that reckless.

SafariJoe, wins again!
  • Associate 2 in PE - LBOs
Jul 21, 2021 - 9:40am

$4mm saved up from 9 years of bonuses in finance and good investment returns (30 yo)

Spent $3k in month for rent and mostly points for travel due to decent amount of travel for work

  • VP in IB - Gen
Jul 21, 2021 - 10:12am

I enjoyed my 20s and am enjoying my 30s but definitely got more serious about saving and Fatfiring as I approach my mid-to-late 30s.  Liquid net worth is approaching $3M.  If my illiquid investments monetize / IPO, then I'm definitely done.

I think one thing to keep in mind is that we work in a volatile industry and you can't live as if you'll always get paid this outsized compensation so I've basically gameplanned for the day I'm laid off and am unable to get back into the industry

  • VP in PE - Other
Jul 21, 2021 - 12:49pm

That's exactly how I think about it too. Really just trying to save and invest while I can in the event something happens and I'm unable to continue in the industry. Pessimistic look, but I prefer to consider downside rather than assume I'll be in this position for the rest of my life.

Jul 24, 2021 - 5:04pm

Everyone is talking about constantly saving and setting aside money into the market but it looks like you all have already enjoyed over a decade of very nice market gains...are those of us just starting banking now supposed to just throw it all into the market at these levels when a lot of you are probably even looking to sell and cash out some? I get that over the long-run it won't matter, but still...?

Array
  • Incoming Analyst in IB - Cov
Jul 21, 2021 - 10:48am

Maybe a bit of a specific/niche question, but as a newly minted analyst 1, I was wondering if one of you "old heads" could give me an opinion or an outside perspective on my spending habits? I come from a relatively small town and honestly moving to NYC has really been eye boggling. Coming from a very financially conservative background where my parents weren't very well off makes me want to save as much as possible as soon as possible, but the comments above regarding rewarding yourself with a certain lifestyle have been really helpful and interesting to hear, as that's pretty much the furthest from what I've grown up to.

Currently have budgeted about 30% of my current income each payslip (100k base) to a Roth 401k, though that's really in an attempt to maximize savings for this year. I expect to reduce this to around 20% per payslip or less next year (just looking to maximize the 20k save per year next year with base). If I'm able to max out my retirement before my bonus, then ideally about 80% of bonus would go towards mutual funds/etfs that my workplace allows; or, am considering doing the reverse and investing more of my monthly "normal" income to ETFs while investing the lump sum of my bonus to my retirement. I live with 4 others in an "okay" apartment, paying about $1400 in rent per month which really helps make the aforementioned savings possible.

I'm also considering moving to CorpDev/Strat rather than buyside because of the lifestyle change, maybe further contributing to my strong desire to save as much as I can assuming a pay cut after a year or two. Does this make sense? Am I saving too much or too little?

Thanks!

  • Analyst 1 in IB - Cov
Jul 21, 2021 - 1:33pm

Thanks I really appreciate the positive feedback! I'll definitely keep at it and try to watch out for lifestyle creep. If I can ask: did you see yourself falling into that lifestyle creep as you rose through your career in HF? How do you balance a healthy amount of improvements to your lifestyle as your comp progresses vs finding yourself in a materialistic rat race that so many people in finance seem to fall into? Happy to dm if necessary to avoid hijacking this post!

Jul 21, 2021 - 3:18pm

Student loans are obviously a big wildcard, but unless you have a mountain of debt (which I'd say you *should* live below your means to pay off - the interest rates are pretty high and there's almost no way on earth to ever have those loans forgiven or discharged) most people in IB shouldn't have to choose between enjoying life a little AND saving. 

I'm always a little surprised at how many people in finance don't understand the compounding effect that a decent chunk of money saved in your twenties will have by the time you're in your 40s. Rough numbers: you put $1m away by the time you're 30 (not easy, I admit, but not at all impossible), it doubles *by itself* by the time you're 40, now you've got $2m probably appreciating by $100k+ / year. To put that much away each year, on the other hand, would eat up easily $150k in pre-tax income. 

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Jul 23, 2021 - 10:42am

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  • Intern in IB - Cov
Jul 23, 2021 - 11:26am

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