For those of you that have been in the industry for a few years this post needs to be read.
When you first joined the Street out of college you likely thought that $100K a year was more than enough money for you to be happy. You got your first bonus check and if you were good it was in the range of $50-60K. You made well over $100K and you’re just a young 22 year old guy out of college. At this point your expectations begin to rise and the following cycle traps you into a career on Wall Street.
You make ~10% more. You get pigeon holed into more niche segments within the Street. You get promoted which gives you a ~25%+ pay increase with each promotion. You begin making 10% more annually. You get pigeon holed into more niche segments. Now you’re trapped. Every year you survive is another step down the rabbit hole as your decision to leave the Street will come at a significant economic cost. This is certainly a first world problem but here is how you break free of the golden handcuffs.
1) Save Your Bonus: The best advice any legitimate Wall Street professional will give you is this “Always save your bonus”. You can spend your entire base salary on drugs, alcohol, clothes, trips and strippers but you must save your bonus. Every penny. Roughly speaking, your bonus will represent ~40-50% of your total compensation package so your savings rate is immediately near half of your income. Even if you were a lowly analyst for ten years straight you’d have $500-600K in your bank account by your early thirties.
2) Avoid A Zero Year: Seeing that you’re likely spending the vast majority of your base salary to remain sane, you should be extremely careful when jumping shops. You might get goosed. A single year of zero dollars for a bonus can set you back significantly as compounding will get the best of you. To avoid this situation stick to the following: a) recruit heavily one month prior to bonuses being paid out, b) if you jump ship mid-year have a written agreement regarding your full year bonus and c) avoid declining platforms such as UBS.
3) Be a Minimalist: We have written about this before however, one of the worst things you can do is spend your money on depreciating assets in your 20’s this includes cars, marriage and unnecessary name brand merchandise. If you’re able to live a simple lifestyle, your cost will remain relatively flat as you never upgrade to an unnecessary penthouse loft.
4) Learn Game: This is a necessity. There are many successful men who will lose most if not all of their assets as they are unable to realize that marriage is not a viable option in our current culture. Once you realize the true nature of women in western societies (at present moment) you’ll never rack your brain over a relationship ever again. You will also spend minimal amounts of money, since all you need is a few bucks for drinks and a cab ride. For better or worse, learn game today or you will be forced to endure many years of deprogramming and undue stress in the future.
5) Have a Walk Away Number: Once you have lived for a year or two in a major city, take out a sheet of paper and write down your walk away number. Do not budge. If you’ve taken a look around you, you’ll quickly realize that most people in the industry have a $10M+ walk away number… this is an obscene amount of money and is the product of increasing expectations, particularly when an individual reaches a revenue generating role. Once you have your walk away number, you shut down your outlook, Bloomberg terminal and company macros and head straight for the glowing green exit sign
Concluding Remarks: The vast majority of Wall Street professionals will unlikely last more than a few years, but for those that do you’ll want to be crystal clear about your walk away number. Assuming you take advice from this blog, you’ll remain single and won’t have any major commitments in your life. With the trajectory laid out here, there is no need to work for more than 10 years on the Street. If you enjoy the job feel free to stay, just remember to always ask yourself if your wrists are feeling heavy.
As a side note, we received many emails regarding investment banking analyst bonuses. Overall the Street was flat to slightly up year over year: $50-60K first year, $65-75K second year, $85-95K third year. More important numbers (all other groups from Associate to Managing Directors) will be available in February.