by Brian DeChesare Comments (202)

Why Bankers Don’t Make Bank: Where Your Paycheck Actually Goes and What to Do About It

Close-up Of Businessman Hands Giving Cheque To Other Person In Office

If you want to work in finance, you probably like money.

And once you break in and become a banker, you’ll be making tons of cash.

But then you’ll waste it all on $200,000 sports cars, drugs, and alimony – right?

While that scenario explains why some finance veterans don’t save much, the problems actually start much earlier – with your first paycheck:

The NYC Analyst

Let’s start with the base case of a newly minted investment banking analyst in NYC – after this, I’ll explain how it’s different in other regions, outside the U.S., and for Associates on up.

If you earn an $85,000 base salary, that’s $7,083 per month (rounded).

With that level of income in NYC, you’ll earn approximately $4,800 per month after taxes.

Yes, federal, state, and city taxes add up to a lot; try this online calculator if you don’t believe me.

Manhattan is also one of the most expensive places to live in the U.S., and at the minimum, you’ll likely spend $2,000 per month on rent.

You could even go higher than that if you get a 1-bedroom apartment instead of a studio, or you could pay a bit less if you live with roommates.

But let’s keep the numbers round and say that you’ll be left with less than $3,000 per month in after-tax, after-rent income.

Models and Bottles and “Other Miscellaneous Expenses”

After that, you’ll most likely spend between $1,000 and $2,000 per month on food, utilities, transportation, dry cleaning, going out, student loans, and so on.

While you can expense dinners if you stay late, you do have to pay for other meals, coffee, and so on.

Even at a very low $10 per day, that’s still $300 per month, and, more realistically, it will be at least 2-3x that amount. We’ll be generous and say $600.

If you assume $100 per month for utilities and $100 for subway / taxi / ride-sharing fare, that brings you close to $1,000.

We haven’t even factored in alcohol, clubbing, or significant others, and already you’re down to about $2,000 per month.

Still, that doesn’t seem so bad: It’s a bit less than $24,000 per year in savings.

But then there are “non-recurring” expenses like your end-of-year vacation, furniture, an HDTV, a new laptop, and so on.

And unless you have rich parents or you won a full-ride scholarship, you probably have monthly student loan payments as well.

The bottom line: In the best-case scenario, you’ll save under $24,000 USD in your first year – before bonuses.

In the worst-case scenario, you might save $10,000 or less.

Those Numbers Are Ridiculous – I Don’t Spend Nearly That Much Money!

That’s what you say now – when you’re still in school, or you’re working a normal job and you don’t live in Manhattan.

Analysts often believe they can save more money than this via several methods:

Method #1: You’ll Live with Your Parents in New Jersey / The Bronx / Queens!

Yes, you might save money if you do this – but you will also want to kill yourself after a month of coming back home at 3 AM and leaving at 6 AM each day.

Plus, what will you do if your VP or MD asks you to come into the office on short notice on the weekend?

Almost all the Analysts and Associates live in Manhattan for these reasons.

Method #2: You Will Never Go Out or Spend Money on Food!

This one may sound plausible, but it won’t be once you start working.

If you want to build your network, you need to go out.

Maybe you won’t spend $500 – $1,000 on bottle service, but you’ll have to spend a bit on drinks and food occasionally.

And if you think you can cook to save money, trust me: If you work 80+ hours per week, cooking is even worse than living in New Jersey.

Method #3: You’ll Buy a Place Instead of Renting!

If you have a trust fund or otherwise have a wealthy family, sure, OK…

…But if you do, why on earth are you even going into the snake pit of investment banking, anyway?

Also, keep in mind that unless you buy the place outright or pay a high percentage of equity upfront, monthly payments on an owned house could easily exceed rent, at least at first.

Method #4: I’ll Get a Roommate!

OK, this one’s viable since it lets you save a lot on rent and other expenses.

Plus, it widens your social circle, and you might even get to know non-bankers.

Other Regions of the U.S.

In other regions, there are two key differences:

  1. Lower rent, food, and going out expenses;
  2. (Possibly) lower taxes.

So, you might be able to save a bit more if you live in Houston; maybe $35,000 – $40,000 due to the lower cost of living and lack of state income taxes.

If you’re in San Francisco, you might save even less than in NY due to the ridiculous rent, while LA is slightly less insane (though still far worse than Houston).

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Outside the US

The major differences:

  1. (Potentially) lower taxes or no taxes at all.
  2. (Potentially) a much lower cost of living.
  3. …but your base salary may also be less if you’re at a local firm rather than a global bank.

I wrote “Potentially” above because if you’re in London, for example, it’s not much different than the NYC scenario and may be even more expensive.

But if you’re in Dubai, Saudi Arabia, or other emerging markets, then you can save a ton of money thanks to the lack of taxes.

However, you have to be careful because domestic firms in these places tend to pay far less than the global investment banks.

So, even if you pay no income taxes, you might end up earning less if you’re at a truly “local” boutique.

Associates On Up

If you’re starting as an Associate, you’ll get a higher base salary – more like $125K – but you will also have higher expenses, such as $200K of business school debt and a family (potentially).

$125K of base salary is about $7,000 per month after taxes in New York City, so you can save more than Analysts.

But you still won’t be amassing a fortune just from your base salary.

If you’re more senior – VP to MD level – your base salary actually doesn’t increase that much relative to your seniority.

A VP might have a base salary between $200K and $300K, while MDs at large banks might earn between $300K and $500K.

After NYC taxes, $300K is roughly $180K, while $500K is roughly $300K.

That sounds like a lot, but at that level, you’re probably not going to want to live in a small, crappy studio apartment, so housing could easily remove a good percentage of that.

Plus, you’ll probably have kids and/or other family members to take care of.

Summer Interns

As a summer intern, you’ll get a pro-rated salary based on what full-time bankers earn .

If you work for 1/4 of the year and, therefore, earn around $21,000, you can save quite a bit if you get cheap student housing.

You’ll also get a large tax refund the next year because you only worked for 3 months.

Even with all the other expenses, you might save around $10,000 as a summer intern.

Signing Bonuses, Relocation & 401(k) Contributions

I didn’t take these into account above, because I’m assuming that you use most of the after-tax signing bonus and/or relocation bonus to actually pay for things and relocate.

You can make contributions to retirement savings plans that save you a bit in taxes, but these don’t result in a dramatically different picture – and you still have to pay taxes when you withdraw money.

What All This Means

This was a long article with a lot of numbers – here’s what it all means, and what you should do as a result:

If Your Primary Goal in Banking is to Save Money, Do Not Work in New York or London

Thanks to taxes and the ridiculously high cost-of-living in these places, you will save far more of your salary in regions like Dubai, Saudi Arabia, and Hong Kong.

Just make sure that you’re not working for a local 3-person firm or your salary might also get cut by 75%.

…But If Saving Money Really Is Your Main Goal, You Might Have the Wrong Idea

No matter what you do, you’re not going to save a fortune as an analyst or associate.

You do investment banking because you want to invest in yourself and have access to much better opportunities in the future.

Doing it to save a lot of money in the short-term isn’t a wise idea because you probably won’t save that much.

Your Yearly Savings are Heavily Dependent on Your Bonus – So Don’t Blow It

Even a “modest bonus” is more than what you save during the entire rest of the year.

That’s true at the Analyst level, and it becomes even truer at the Associate and VP levels and beyond.

Note, however, that much of your bonus at those levels will be in the form of stock and other deferred compensation – so in cash terms, you may not see a huge increase over the cash bonuses of Associates.

Whatever you do, do not do anything stupid or risky with your bonus – put it all in the bank or in conservative investments so you have a cushion.

As a VP once told me, “You can piss away your salary on coke and strippers, but save your bonus.”

I’d recommend the strippers – they’re much cheaper than coke…

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Honestly how much do the MD’s make and how long does it take to get there? Because it’s not uncommon to make 100k+ starting in oil and gas or at Google/FB/Apple/etc. and you work way, way less. What makes people kill themselves for what’s not that much money in NYC when you could pull that much working in tech or engineering (and lower COL)? It’s gotta be the prospect of making millions as an MD right?

    1. https://www.mergersandinquisitions.com/investment-banking-hierarchy/
      https://www.mergersandinquisitions.com/2016-investment-banking-bonuses/

      Base salaries range from $300K to $500K at large firms with bonuses taking that total compensation up to the low millions… yes you can make $100K+ in other industries, but the difference is that you *start out* at $150K in IB as an Analyst and only move up from there, hence the competitiveness of the field.

  2. Hey, I want to go study in England for my undergraduate and University of Manchester has accepted me. I am not sure if you are familiar with degrees in England, but which degree do you think it will be more useful for a career in IB and is more respected in this industry: Bachelor of Arts in Economics, Bachelor of Arts in Economics and Finance or Bachelor of science in Internationa Business, Economics and Finance? Is it true that bankers like much better a single honours degree than joint honours? Have you heard of this university/ meet other analysts from Uni of Manchester? Thank you.

    1. I am not familiar with the University of Manchester, but our recommendations for degrees/majors are here:

      https://www.mergersandinquisitions.com/investment-banking-major-best-2015/

  3. As an analyst or an associate?
    In France I would say 50 base for a first year analyst and 70 for a first year associate. I might be a bit pessimistic. Bonus would probably 1x base if you perform well.

  4. Hi, I will be pursuing MSc Finance from IE Madrid ( 2015-2016). I was a business analyst for Vodafone in India which is not really relevant here.
    I just want to know what is the base/starting salary for an Investment Banker in France or Spain??

    1. M&I - Nicole

      I am not 100% sure; readers may have better insights

  5. Anyiti Nanyama

    Lool…. Dont even think about cooking. That is a very interesting pointer to notice.

  6. Ali Hachem

    great article ! But i have a question what if one works lets say in quebec or canada what would it be like ?

  7. M&I, great and very useful article !!!
    I have a question. What if one goes to work to save up as much as possible in some emerging market, such as Dubai or Qatar. Later, how hard will it be to transfer to NYC or London. Personally, I want to start off in Dubai then be relocated to Houston, I love oil and gas industry.

    1. M&I - Nicole

      I think it can be challenging unless you have the work visa and relevant work experience. It’s easier to transfer internally

  8. So for energy investment banking,will I be saving more if I go to places such as Houston? What is the approximate tax rate there?

    1. M&I - Nicole

      You can say so. I’m not sure re tax rate you may want to check online.

  9. Honestly, i thought the pay as a first year IB analyst would be much higher. With the half or at least 30% of the bonus go to tax, the total after tax income is not high at all when you work 80-100 hours per week. So why still work for IB? is working for corporate finance at F500 companies better? since there is better work/life balance with the similar hourly pay? Thanks for the explanation.

    1. M&I - Nicole

      Yes you’ve got a point though the pay and exit opportunities at IB may still be better. But if you prefer work life balance you may want to check out https://www.mergersandinquisitions.com/private-banking/

  10. What’s better for fiance: Houston or Dallas?

    1. For IB, Houston, because most energy groups in the US are based there. Dallas is generally smaller but still has some non-IB opportunities.

      1. What kind of non-IB opportunities? Private equity?

        1. M&I - Nicole

          Yes perhaps, or even commercial/retail banking

  11. I was offered a finance job in NYC for 145.000 (I’m higher-up). Do you know the tax rate for that?

    1. I do not, but a quick Google search reveals this very useful tax calculator by state: http://www.paycheckcity.com/cointuitonlinepayroll/netpaycalculator.asp

  12. Eton '74, Trinity, Cambridge '79

    This article was made a while ago: Do most banks still offer housing stipends in Hong Kong? Is that just American Companies, or British ones as well?
    Also, is the cost of living in Hong Kong really much lower than New York or London? I’ve heard it’s higher?

    1. Some banks offer housing stipends in HK but it is not universal.

      Cost of living in HK is definitely NOT lower at all, and never has been – I just meant that taxes are lower than NY or London, which they are. Real estate prices are probably about the same as NY prices overall, and overall COL is about on par, maybe a bit less in some areas.

      See: https://www.mergersandinquisitions.com/investment-banking-hong-kong/

  13. Hi, great article! This is the second time I’m reading this after a long time. I just have a question and a suggestion. I always wondered this about professions such as investment banking and many finance positions. Isn’t it illegal for companies to make their employees work more than a certain number of hours per week? I know you sign a contract with the bank once you are hired but don’t they need to take into account state labour laws? Which brings me onto my suggestion, do you mind writing an article about common legislation (labour laws) in investment banking and various other finance posiitons? I’m sorry if you already did and I’m not finding it. Thanks. Great article once again! :)

    1. M&I - Nicole

      Thanks for your input – we will keep your suggestion in mind though unlikely for now unless we have strong interest from readers on this front

      No it isn’t illegal for companies to make you work longer than XX hours. I believe there’s a clause on the contract that states that but I’m not sure of the exact wordings

      1. In most countries, there are limitations to how many hours you can legally work, irrespective of how much you’re being paid. Standard clauses in contracts say stuff like “due to the specific nature of your position, your working hours cannot be known in advance”. The truth is that everyone accepts the crazy hours because this is the price to pay to get your bonus. It is a game that everybody plays but it is not uncommon that bankers not happy with their bonus would quit their bank and sue it in front of the competent court for making them work wy more than what the law tolerates. When they do not specify how much you can work, laws may specify that you should get a minimum of X consecutive hours of rest between two working days. SInce IB is less hot than it used to be, banks have promoted codes of conduct in order to protect juniors and keep them on the job for more than a year or 18 months.

        1. M&I - Nicole

          Thanks for your input!

  14. I taught in public schools for over 30 years. Loved every min. of it. Got to do what I loved, and enjoyed the terrific kids and community I worked in. Had excellent benefits, and lived a modest lifestyle/in a modest home. Was able to spend holidays and a little time in the summer with my own kids…was at home to go to concerts and ball games. Retired with a pension, which at 5% or 6% is equivalent to a little less than 1 million. It’s not 10 milliony or, modest home needs some work. No traveling around the world either. But I’m retired at 55. Money isnt everything.

    1. M&I - Nicole

      Thanks for your input.

  15. what if you save your bonus each year. wont you be able to save a ton of money if you save your huge bonus

    1. M&I - Nicole

      Well 1/2 goes to tax. Yes you will save a bit, but it also depends on your spending.

  16. Ignacio Lopez

    I just got out of the Marines and they give a GI Bill to pay for schooling. what school would you recommend to get me started down the long road to becoming a succesful investment banker

  17. Do you guys know the rough numbers for bankers who work for big Chinese investment banks? (Aka. CITIC Securities & CICC) Is their base salary a lot lower than the BBs in general?

    1. M&I - Nicole

      I don’t know the rough numbers but yes their base and bonuses are likely to be lower than most BBs

      1. What about the BBs in mainland China – do they execute the global pay scheme or they do their “local scheme”?

        1. M&I - Nicole

          I am not 100% sure, I think they use their local scheme unless you’re on an expat package

  18. “You’ll be spending a minimum of $1,000 up to $2,000 when you take into account food, utilities, transportation, dry cleaning, clubbing, student loans, and so on.”
    We will be spending that per month or per year?

    1. Per month. I literally don’t even remember the last time I had a credit card bill for less than $1,000, and I didn’t even live in NYC when I was in banking.

      1. Where did you live when you were in banking and what was the reason?

  19. You provided very specific number referring to analysts. Could you please provide these numbers with associates thorough MDs?
    I am also interested if any of this is different with those in PE? Again, I’d like numbers.
    Thank you

    1. M&I - Nicole

      We don’t have the numbers from associates through MDs yet. I don’t think these numbers are easily available because as you progress in banking, different groups/banks’ pay structures are different and the information is pretty sensitive.

  20. Good one! am a dutch transfer student doing my BBA at northwood university, thinking about to do my MBA.. I visited last week UF in gainsville, was impressed I got 2 choices or Uf in florida or Bradford university in England?? realy interested to become an I-banker. what do you think?

    1. M&I - Nicole

      I have not heard of those universities before, so I don’t think they are target schools. I am not familiar with their programs. I’d advise you to look at their curriculum and choose the one with a stronger Finance and Accounting focus. I would also talk to the respective schools’ career placement offices choose the school that offers better career placement services and a larger alumni network in finance. I’d probably choose UFlorida given its location.

  21. How is it in Boston? Is OE any different?

    1. Boston is still relatively expensive in terms of taxes and cost of living, maybe a bit better than NY or London.

      1. Will I be able to save a lot of money? Also, I meant to type PE; is it possible to save a good amount of money in PE, be it Boston or Manhatten?

        1. M&I - Nicole

          As a junior, I think it can be tough to save in Manhattan given high rent and taxes. Perhaps the cost of living is slightly lower in Boston given lower taxes and rent. You’ll have to factor in partying, going out, shopping, etc. If you say somewhere with lower rent (further away from office)/or have multiple roommates, eat cheap breakfast and lunch (and work overtime so they pay for your dinner), and not spend on booze and expensive suits and girls, I think you can save a decent amount.

          1. Is PE different?

          2. Is PE different? As in, will I be able to save more money?

          3. M&I - Nicole

            The pay is probably similar if not less versus banks at the junior level in most firms. I’m sure you can save, though chances of saving a lot are relatively low.

  22. “That seems OK – but then there are non-monthly expenses like your end-of-year vacation, furniture, an HDTV, a new laptop, and so on.
    Even if you’re extremely frugal and manage to save $2,000 per month – $24,000 per year – you will only be left with $15,000 – $20,000 once you take all those expenses into account.”
    “Maybe you won’t spend $500 on bottle service every night, but you will spend something.”
    “You might make $150K-$200K at the highest levels, but your tastes will also increase and you won’t want to settle for a $1,500/month studio apartment.”
    I really hate clubbing, and wouldn’t mid living simply. How much would I save as an analyst if I saved on vacations, laptops, etc.? How much would I save as an associate? How much would I save as a senior partner/VP?

    1. You can save some, but the point is that your base salary is relatively low and taxes and cost of living are very high in NYC and London. So yes, maybe you can save $10-12K extra per year as an analyst vs. someone who goes out a lot, but in the grand scheme of things it is not a big amount of 30 years. As someone senior you can save a lot more because you make a lot more… but trust me, you will not want to live in a 100 sq ft apartment when you make $500K+ per year.

  23. How about in China? Any pay discount?

    1. M&I - Nicole

      Depends on the bank you work for

      1. How about South korea? haha i heard the economy is stable there

        1. M&I - Nicole

          Your question is?

          1. Gaone Lloyd Ramatshaba

            I was asking about the industry in south Korea

  24. Andersson

    Is it true that an investment banker with 3-5 years of experience can make 70-75 000 USD a month?

    What position will a very good investment banker who started as an analyst at a big IB and worked for 5 years have?

    I want this information since I´m trying to see were I might end up if I choose to go the banking route. I Have 2 years left at the university and I really like what investment banks work with, I´m alredy in touch with some bankers and I attend at anything finance related in the university (its a target uni.

    Thank you for your amazing site!

    1. M&I - Nicole

      Yes, or more.

      A banker who has worked for 5 years should be an Associate or VP (if he/she is promoted early)

      I would focus your energies on getting in. If you’re passionate about finance and are good at what you do, you’ll get paid, especially if you’re a top performer. Otherwise, you might not survive in this industry, especially given the crisis.

  25. This is a great article as I’ve just started looking at housing in NY in preparation for my graduation in Dec. I actually found this site while searching for reasonable salary expectations for a first year investment banker…

    But I will also be applying for sales & trading positions at each bank I apply to as well. I could not find any salary or hours worked info for those positions on the site. Any good references?

    1. M&I - Nicole

      The base in S&T in major BBs should, I believe, be the same as the base in IBD/M&A in major BBs. Bonus may be different depending on you and your group’s performance. Hours etc: https://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-2-lifestyle/

  26. why u make 70K ?
    i have chemical engineering BS degree then i took MBA from Ivy league school ” Pen U”
    working in NYC and third year associate
    around 250K a year ( bonuses included )
    i live in NJ… i go with train thou

    1. Zaid, I am about to graduate with a MEng Chemical engineering and i want to get into investment banking, is there any advice you van offer? How can i stand out against other candidates with more relevant degrees?

      1. Houston.

    2. How did you graduate from an Ivy league with your utterlack of grammar and the english language?

  27. So am I right in assuming you only have a real chance at making a lot of savings when you’re more senior; when/if you use of the exit opps; if you’re in Sales and Trading?

    1. M&I - Nicole

      Savings – depends on your spending habits and your ability to invest. However, most analysts don’t save up much in NY given high taxes and rent, unless you have parents nearby and live w them.

      when/if you use of the exit opps; if you’re in Sales and Trading? – Can you clarify your question?

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