Some people think that if you're an investment banker you're on the roads to
riches and you'll soon be partying it up with models and bottles
Well okay I don't really know if anyone thinks that these days but I did find
this meme that I thought was just super accurate because I was building a ton of
excel models when I was in banking and drinking water all the time to stay
hydrated and keep myself awake Anyhow today will be a fun video about
how much I made as an investment banker and what I spent all that money on
What's up everyone my name is Ben, I'm a former JP Morgan investment banking
analyst and welcome to rareliquid the best channel for tech investing
Today's agenda looks like this. I'll first be breaking down how much I made,
then I'll show you how i spent every single penny and lastly, I'll tell you
how it all felt Before I get started I did want to ask
if you could please smash that like button because it would really help
support this channel and also on a separate note if you're
interested in getting a weekly newsletter
with thoughts about finance, tech, investing and cryptocurrencies,
then feel free to check that out in the description below. Alright with that
said, let's first discuss my pre-tax and post-tax income. Just as a bit of
background I worked in the JP Morgan San Francisco healthcare group for a little
less than three years from 2015 to 2018. I did also make a video about why I quit
banking and what at the end of life and investment banker is like, so feel free
to check those videos out if you're interested
Okay but jumping straight into the numbers, there are two components to your
income as a banker and that is your annual salary and your bonus
and for me in my second year I was making an $85,000
salary and earned a $70,000 bonus bringing my total pre-tax income to $155,000
The salary is the same across all analysts in the class but your bonus is
really dependent on your performance and quite honestly it really depends on
your relationships with your associates, VPs and directors
I had a few co-workers who I thought were really great analysts but they
didn't get the ratings that I thought that they
deserved because their relationships with the team were not as strong
At JP Morgan you're ranked from a scale of one to five basically but they call
the ratings N, M, Minus M, M plus, and E and if I
remember correctly the N stands for needs improvement M stands
for meets expectations and E stands for exceeds expectations
In some groups you can have a lot of analysts and maybe even the majority
or a large minority of them receiving the top
rating while in other groups like mine everyone was graded on a bell curve
which made it pretty tough because we had something like
15 analysts in my class and only something like two received that top
bucket rating now since I'm assuming that a lot of you
guys are going to ask I did get that top bucket rating in my second year
In my first year to be just completely transparent I did not I received
actually an M so I was kind of in the middle of the
pack and a lot of the improvement that I really had for
my first to second year was in my work I guess also but
really it was in my relationships that I had with my team which really
strengthened over time and more of the associates and people
that I worked with really started rooting for me as I got to know them
better Now obviously bankers at every single
level care a lot about their bonuses because they work so much at their job
and they just want to earn as much as they can so
they can be compensated for all the hours they put in and bonus day is
really intense because everyone gets called
into an office by your resource manager and then judging kind of based on the
expression that the person has when they leave the room,
you can kind of tell who did well and who didn't but
going into it you also kind of have an understanding of how you're going to
perform but you just never know until you're finally given that
information of what your rating is and what your bonus is going to be that year
But anyway going back to my income, let's calculate what my post tax
income looks like. 85 thousand dollars divided by twelve
is $7,083 so that's how much I was earning pre-tax
each month and I was saving 15% of that into my 401k so that
left me with about $6,000 in taxable income each month
From there I paid about 25% in taxes and i know this looks a little bit low given
that I made $155,000 during the year but it's because my annual taxable
income was about $6,000 times 12 which is around $72,000 which
isn't crazy high and tax brackets are structured so that you pay
increasingly more taxes as your income increases rather than paying the same
rate for your entire salary Going to my bonus though this is where
the tax man really hurt me to the government since I get my bonus
paid in one month it looks like my annual
salary is seventy thousand dollars times twelve which is eight hundred forty
thousand dollars As a result the taxes I paid on it was
49% percent so the actual figure I was transferred
to my bank account from my seventy thousand dollar bonus
was thirty four thousand five hundred seventy nine dollars and I actually went
back to my old statements to confirm this so here's a screenshot
So in total when you add up my monthly take-home income and my bonus
I brought home about eighty nine thousand dollars and about seven
thousand four hundred dollars a month Okay so now that you know what I made
let's talk about what I spent all of it on. Now first of all, I didn't
spend my money month to month as if I was getting a bonus because
obviously if I was spending more than I was taking home each month then I'd have
a ton of credit card debt and that's just
totally irresponsible. As a result I'll first be going over my monthly expenses
and then I'll let you know how I spent my bonus
So starting with the responsible stuff my biggest cost of course was rent at
$1,375 and let me take a second to talk about
my living situation I was actually living in the living room
so not even a room that had walls with five other friends in a town home
so remember earlier when I was talking about models and bottles
yeah that wasn't happening now I probably could have found another spot
in SF around the similar price range that did have walls
for a room, but I actually wanted to be in that area close to work and live with
my friends and I didn't really mind living in the
living room because I wasn't really home that often
The funny thing though is that amongst my friends we had the largest home so
our spot was always the place to go for pre-games or
just house parties and things like that and so a lot of times I would be working
on the weekends in my living room while there'd be
music blasting and people playing beer pong just a few feet away from me while
I'm working on a powerpoint model or excel
or not powerpoint model a powerpoint and excel model
and I would just work as quickly as I can and then try to join them
but anyway back to my expenses on average I spent about 25 dollars a day
on food and groceries which was about $750
a month. As a quick note on this JP Morgan also covered up to $25
off for dinners if you worked past 6 or 7 p.m something like that
and so Monday through Thursday i pretty much had each dinner expense
and on the weekends if you worked anywhere from I think it was four to six
hours then each four to six hours you work
then you have another $25 meal that you can expense so
I was saving quite a bit of money on food just because I was
kind of working all the time. My portion of the apartment utilities and the phone
bill I was paying for my family came out to around $300
a month and I paid for most of my undergraduate degree through
scholarships and loans so paying back the loans was around $200 a month but
sometimes I would pay more of it back I also used whatever remaining money I
had at the time to invest and back in 2017 I was putting all my
extra money into crypto since JPM didn't let me buy stocks
without approving each trade which was a huge hassle
By the way if you're interested in investing in the crypto space I do have
a video about my favorite altcoin, one about Bitcoin versus Ethereum, and a
few videos about Coinbase and its stock versus Bitcoin, its
valuation overall as a company, and things like that so feel free to check
those out if you're interested. Anyway now to the quote unquote irresponsible
stuff I spent around $500 a month on random
things like concert tickets or weekend trips with friends and this amount would
fluctuate if I went on a big trip to Asia or something like that
I also broke out alcohol into its own category because at that point all my
friends and I had just graduated from college so we would go out once or twice
a weekend and so honestly alcohol was just a
pretty significant monthly cost and lastly I was spending
about a hundred dollars on Ubers only on the weekends since JPM paid for the
ubers I took back home once it got past 9 p.m
if I remember that correctly. Alright so that's how I spent my money each
month let me now go into how I spent my bonus so if you
watched my why I quit investment banking video you'll know that I quit
rather abruptly during my third year to backpack across the world
so I actually spent around fifteen thousand dollars traveling to ten or so
different countries for about eight months
I also spent around $5,000 or so paying back student loans and then the
remaining $15,000 on a clothing brand I worked on for a few years called
Asthetic Studios which I'll leave a link to in the
description below in case you want to check it out
Alright so before you call me irresponsible for just spending all that
money the $15,000 I spent for traveling was
just money I was really gonna save up but then I decided to travel
and then for Asthetic Studios that was more of an investment into the business
but actually that business ended up kind of
being a dumpster fire because clothing and fashion is just a really really
tough industry. Okay so now that you know how much I made and spent let me tell
you about how it all felt. Now in general, I
did have a lot of gratitude for the financial spot I was in
because I just knew that there were hundreds of other people who would just
be willing to take my spot and if I was ungrateful for the position I was in
with what I was learning and the exposure I was getting in my
work and how much I was just developing as a person
and professional I felt like it would just be very ungrateful and the wrong
thing to do to have a mindset of being ungrateful for my job. I also really
liked my group except maybe for a few people that were just kind of meh
or some of them were actually just kind of crazy but
in general I really liked most of the people that I worked with and my
group had a really good culture. I don't know if I said that already but
basically I didn't really have as bad of a time
in banking that I thought I would and I think I
was pretty lucky to have a really good banking experience overall
at the same time did I feel rich I would say
no I mean now that I've been on an entrepreneurial journey over the past
few years just working on random side projects and a business that I was
starting from scratch I would say that if I was making six
figures now that would be great and amazing but I would say that
because so much of my money was going to things like taxes
rent food and all that stuff I didn't really feel like I was making life
changing money but I was of course financially comfortable also
if you're an investment banking analyst you're not actually focused too much
about how much you're making in the first few years
or really think that even it's that much when compared to most people it kind of
is because you know that when you keep
going up the financial career ladder and when you become a
director or go to private equity or a hedge fund or things like that
your salary and bonuses just keep multiplying so
it's not really about how much you're making in those first few years actually
it's much more about how much you're going to make
10, 15, 20 years down the line. Now of course the big price you pay is with
a lot of the time and energy that you have to put into the job versus other
jobs and I would probably just say that you know
going through a lot of the entrepreneurial
more type of ventures that I have been doing recently with Asthetic Studios my
previous company and rareliquid I have a lot more I
would say a richer set of experiences that I truly actually
enjoy much more day-to-day so personally if you had to ask I have zero
regrets about leaving my former job I'm really happy right now working on
rareliquid and we'll see how this journey
you know takes me and where it goes but basically what I'm just trying to say
is that I think banking was a really interesting opportunity that I had where
I made pretty decent money but in the end I wanted to pursue things
that were not just about financial gain or being incentivized by anything
like that but more so um just the set of
experiences that I have really I mentioned something similar to this in
one of my previous videos about why I quit banking and
people mentioned that I have this money wall over here and say that is really
contradictory but actually it's a frame of two dollar bills and it's
like more of an art piece that my parents bought and I just started this
youtube channel and I was just like oh maybe I'll just use this as a background
since I talk about investing um so yeah that's why that's there all
right so that wraps up the video if you want to check out any of the
videos I mentioned about the crypto space or banking I'll leave those
in the description below and if you want to check out my other social media
accounts my twitter, tik tok, instagram all have the same username rareliquid
and with that said that wraps everything up thanks so much for tuning in hope to
catch you in the next one
[Music]