If you’re fresh out of college, slaving away for a couple years at $85,000 plus bonus and great exit opportunities doesn’t sound too bad. If you’re 10 years out and making considerably more than that in a less stressful job, of course it sounds like a living hell.
I think that is right. I worked in IB/ER at GS/MS over a decade ago, and the hours sucked as did the quality of work sometimes. However, overall it was probably the best fundamental training in business I could get maybe outside of McK/Bain/BCG, and as much as people complain about the hours and the sometimes perfunctory work, “it” (whether it be the work itself or the people around you) is probably far more interesting than most other jobs out there. And yes, it really is all about the exit opportunities and building a great network that could serve you for life.
When I started my career, base salaries were about $50K and bonus was $40-60K first year out of school depending on where you ranked in your analyst class. Sure, I understand all the comparisons with how if you prorated that across the number of hours worked, maybe you’d be better off flipping burgers at McDonald’s. That is probably true, but also not the point. People who work at McDonald’s for ten years don’t get to play for the potential of making 3-10x more all-in compensation 5-10 years out of IB/ER. Just to put some real numbers around this, that’s $300K to $1mm+, with upper end being reserved for great hedge fund / VC / private equity performers.
Also, the fact that IB base salaries have gone up to $85K for entry level roles isn’t surprising. Most of it is because bonuses have gotten smaller relative to base, and there is more deferred comp, so employees want more money upfront. The other reason is because banks have to offer better pay and lifestyle or everyone would leave Wall Street for Silicon Valley, which has been happening now for several years. It’s not because banks suddenly became more altruistic and cared more about analysts and associates.
$85k plus some unspecified bonus seems pretty good for a 21/22 year old college graduate fresh out of school. Yes the hours suck, but numi and itera are right that few other places have such promising exit options, not to mention relatively few places pay that much for people with that little work experience.
$85k is hard in Manhattan if you have to support a family with kids in school. But presumably most junior analysts are going to be making substantially more by the time they get there.
The comments about the exit options are legitimate, but the “few places pay that much for people with that little work experience” are simply not true- not on a cost of living adjusted basis. You’d be hard pressed to find a job in Texas that pays less the $35,000 to recent graduates. Average is $50,000 or $55,000 here, which is well over $100,000 in Manhattan. Not disagreeing with the exit opportunity comments. Just saying the pay comments arent really correct.
But (again) for young single people (about which the article is speaking) those cost of living calculators are total BS. Over the past 5 years I’ve lived in both the midwest and in Manhattan. And my total annual spending is nearly identical in both places. In the midwest, you spend about $500+ per month on a vehicle lease, gasoline, insurance, maintenance, etc. In Manhattan, you don’t need a car, but you spend $500+ per month extra on accommodations. For the young and unmarried, it’s nearly a wash. For somebody with a family, the math would be different. But few of these 21-year-olds that the article is talking about are likely to have children already.
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I already own my own car. So i woult not be making a payment like your post states.
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What about the cost of taxis and subways? You didn’t include that in the calculations. As well as increased groceries, food, drinks, clothes, ultilities.
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Finally, lets say your hypothesis is true and someone in NYC and somewhere else do spend the exact same amount of purchasing power in the respective places. What about the remaining money? The person in Texas will be able to buy more things with their remaining funds than the person in NYC.
It’s weird that this Wall Street Journal article didn’t take your car into account. Sloppy reporting.
My remaining funds go to Vanguard. Mutual funds cost the same everywhere.
Yo Vandeley, how come you didn’t respond to my post #19 about why the “quality of life” in housing kind of breaks down?
I do agree with you that salary without taking into account COL is meaningless. ie: $85k in Texas provides you a very different disposable income than $85k in Calgary where everything costs more. At the end of the day though, we make tradeoffs and making tradeoffs doesn’t necessarly move the quality of life needle. Truthfully, I was probably happier in my small 1 BR apt vs. my 3 bedroom house. Required less effort. I think that’s what Wendy and I are trying to get at. I mean what are expenses for a fresh grad? Apartment/house, gas, beer, utilities, and a few other frivilous things. It’s not like we’re comparing the cost of day care in NYC vs Texas.
I’m going up to NYC this week, so I’ll be dealing first hand with the higher costs of beers and such, though there is a beautiful thing called dollar slices in NYC. $2.50 for 2 slices of pizza and a can of coke. Yum.
Just went and reread your post 19. Even if one does like a smaller place, the realiity is a 750 square foot place will cost more in NY than TX. Any way you slice it, even if one does have fewer expenses at a young age, they will still have less money in NYC. Whether thats less money to save, less to spend at the strip club, less to use in a poker game… somewhere you are losing utility. I would argue that at a young age is the most important time to make a relatively large salary. You can begin your investing earlier and let compounding take effect.
Oh Snap! LOL
What $1,000 Rent Looks Like In America
I’m surprised SF is lower than DC and 60% of NYC.
Earthquake discount?
85K is more than enough for a family in NY even without bonus, dunno wtf ppl talking about.
Likewise, families live on 35k in texas. The point is, 85k is a little misleading and not as amazing as it initially sounds due to location.
This thread is silly - that’s a good salary regardless of where you are. “Stuff” is overrated. Your car will be the “old version” in four years, the “hot new electronic” that looks like child’s play in two years, that “cool new clothing item” that the celebrities will stop wearing next year. Stuff is not forever.
Vand,
Make sure you stay wherever you are. You wouldn’t make it in NYC. Your vanity would get turned to shit real quick because there is always someone richer, smarter, better looking or some combination. It takes self-worth to survive here and you seem to survive off the opinions of others.
It’s more than enough for a couple. But if you have to educate and take care of children, $85k and no bonus is not going to cut it in NYC, at least if you care about the results of that education.
That said, most graduating seniors who will be working at GS don’t have children of school age.
There’s a reason that $35k is enough to live on in Texas. And it’s because lots of those $35k places just aren’t all that great places to live. You may not die (though be careful with all those guns!), and you might have large living room to put that awesome $1000 TV that represents about 3% of your beforetax income, but one of the big reasons that it costs so much to live in NY is because it’s a highly desirable place to live.
Consider that living in a desirable city is part of your compensation package as well.
You might be tempted to say, “No, it’s the taxes, Texas doesn’t have high taxes like New York.” But if taxes really were the primary reason everything is so expensive, no one would want to live here, and that would drive the prices down. Taxes influence things at the margin, but the primary reason the prices are so high is that it’s a desirable place to live.
The rule of thumb is to spend no more than 30% of gross salary on housing. 30% of $85k is $2,125 per month. That will get you a 1 bedroom apartment in Queens, or a bachelor apartment in Manhattan. Not really enough for a family.