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When a million isn’t enough: why top bankers are struggling to get by

Curse of the trophy wife (Photo credit: garryknight)

Curse of the trophy wife (Photo credit: garryknight)

In theory, a seven figure annual pay packet should be more than enough to live on. In the UK, only the top 1% of income taxpayers earn anything more than £150k according to figures from the Office of National Statistics. In the US, the top 1% of people earn more than $370k according to the Internal Revenue Service.  And yet, some bankers in the top bracket are having money troubles.

“It’s really not that unusual to find Wall Street bankers who are close to declaring themselves bankrupt,” said Gary Goldstein, co-founder of U.S. search firm Whitney Partners. “Some people are really struggling.”

Claims that bankers are having problems making ends meet won’t do much to ingratiate them to the public. At last week’s Barclays Annual General Meeting, Joan Woolard, a pensioner from the north of England berated Barclays for overpaying its bankers. Anyone who wanted more than £1m ($1.5m) a year was simply a “greedy b*stard,” said Woolard.

For some people working in financial services, however, £1m is simply what’s needed to cover the cost of living.

“You get a lot of people who have a very expensive lifestyle,” said Louise Cooper, a former Goldman Sachs salesperson and financial analyst at Cooper City. “They will always have a nanny, private schools for the children and they will have a very big expensive house. All of this has to be paid for out of taxable income,” she points out. “With a top tax rate of 45%, this means that you need to be earning nearly double what you’re spending.”

Tax is an issue in the U.S. too. “After tax, your million dollars will be around $600k,” said Goldstein. “Out of that, you get people trying to pay the mortgages on, and maintain houses, in the Hamptons and Manhattan, to put three children through private schools costing $40k a year each, and to pay living costs.”

Why can’t bankers simply ditch the house in the Hamptons and put their children into state run educational establishments? Unfortunately, this seems easier said than done. “When you work in banking, you end up surrounded by people who earn a lot of money,” said Erika Shapiro, a former fixed income saleswoman at Goldman, Citi, Credit Suisse and UBS who became a yoga instructor. “Everyone around you has a big mortgage and is sending their children to private schools.”

“You just get trapped at a certain level of expenditure,” said Tony Greenham, a former investment banker at Barclays and head of finance and business at the New Economics Foundation. “You’re in a peer group which aspires to and achieves a certain standard of house in a certain area, a certain type of holiday home, and certain schooling for your children.”

The social conditioning to spend heavily is insidious and is enforced by bankers’ peers, said Nell Montgomery, an ex-Goldman Sachs sales trader-turned psychotherapist. “People in banking get into a thought process whereby having three children at private schools costing £100k after tax is normal. You hear people saying they’d rather pay for private tutoring than spend £10k on a holiday. It’s a mindset in which things which are not normal come to be perceived as standard,” she said.

Ironically, in light of Woolard’s outpouring at the Barclays AGM, Goldstein said top-earning Barclays bankers are suffering most acutely. “Barclays’ bonuses are so heavily deferred that people there are receiving very little cash,” he said. “They are living on $300k-$400k base salaries, which are halved after tax.” Earlier this year, it emerged that Barclays was deferring 100% of all bonuses for its managing directors.

In some cases, the situation is being aggravated by decisions from the past – both in terms of spousal selection and ill-informed borrowing.

Cooper said some of the most impoverished-but-wealthy bankers are those with trophy wives. “You’ll get these guys who turn up at work with the girlfriends they’ve had since university, and then suddenly – once they start making a lot of money – they’ll ditch the old university educated girlfriend and find a much more glamorous and good looking woman that they’ve found through work,” she said. Predictably, Cooper said such wives are high maintenance, expecting expensive handbags, expensive shoes, houses in the right areas, expensive education for their children, jewels, nannies and help. “There are lots of lovely men in the City who’ve been with their wives since they were paupers,” said Cooper. “But there are also some who get trapped in relationships where the deal is that they have to earn a lot of money.”

Trophy wives are an issue on Wall Street as much as London, but Goldstein said U.S. bankers’ woes are being further compounded by foolish borrowing decisions taken during the boom times. “A lot of people borrowed against their stock,” he said. “It was rising by 20%-30% a year and a lot of people borrowed against it to buy a boat or the house in the Hamptons.” Now that stock is worth far less – or, in the case of Lehman or Bear Stearns, nothing at all.

How to learn to live on less 

So what can you do if you’re a banker who’s lost all sense of financial perspective and can’t make ends meet on £1m? Get some perspective, is the widely advocated answer.

“Remember how little you needed to live happily when you were a student,” said Oliver James, a clinical psychologist and author of the book ‘Affluenza’. “People tend to think of their wants as needs,” James added. “But our real needs are actually very basic – you need food, warmth and maybe light, and you need to feel emotionally secure.”

The best antidote to over-spending is to retain a single partner for life, said Cooper: it helps put things in context. Alternatively, try cultivating friendships outside of banking. “I always had a lot of hobbies which brought me into contact with people from different walks of life,” said Shapiro. “I always knew people who earned £25k-30k a year.”

Finally, there’s always therapy. Montgomery said a lot of people in banking formed insecure attachments to their parents as children. This makes them overly-competitive and ostentatious, she said. “When you’re insecure, you can take refuge in a kind of grandiosity in which you say ‘at least I’m earning a lot and going to these kinds of expensive places,” said Montgomery. “You can only get over this kind of thing with intense therapy,” she added.

Related articles:

The best paid jobs beyond investment banking 

Twenty money saving tips from bankers and their wives

How banking can ruin your body and mind

Comments (31)

Comments
  1. Just because you are a ‘top’ banker you don’t have to spend all you earn because if you do you are definitely in the bottom 1% of the population IQ-wise.

  2. When some people come into masses of money with very little or no work, they think: ‘this is easy, I’ll keep spending and the money will be replenished’.

  3. @ Chome24 – I believe that bankers do actually work a lot but anyone earning a lot of money and still struggling financially is an obvious idiot. One should always save for rainy days.

  4. I switched to contracting a few years back and doubled my gross. We live well (nowhere near the sums being mentioned above!), but still within our means. Deciding to work long hours in a stressful job to get the money to then pay for private school, tutors and an emotionally bankrupt relationship or three is not a sustainable lifestyle choice, in my opinion.

    My focus is on saving and investmenting for a rainy day, to buffer my loved ones from the travails of the world. We are fortunate enough to be able to put aside the equivalent of my old salary each month.

    A huge number of people live very differently and not a day goes by when I don’t remember that and give thanks. Ultimately, it’s family and your relationship with them that’s important.

  5. Tumbrels and guillotines would give them perpective.

  6. “You just get trapped at a certain level of expenditure,” “You’re in a peer group which aspires to and achieves a certain standard of house in a certain area, …”

    So basically explanation is “everyone else was doing it”…I think I heard that somewhere before…oh yeah, the playground in grade school.

  7. I think this is totally absurd. “Barclays’ bonuses are so heavily deferred that people there are receiving very little cash,” he said. “They are living on $300k-$400k base salaries, which are halved after tax.”

    $300-$400k base salaries = very little cash = GET A GRIP. There are people dying all over the world. Innocent families being ripped apart in well publicized atrocities yet there are some people, who are so greedy, cannot look beyond their own little bubble.

    It just goes to show that, especially during times when the rest of the country is struggling, banking is legalised criminality.

  8. Living the lifestyle of your peers, superiors and client is maybe the most important investment one can make in ones career…for one reason …NETWORKING. On some level you are forced to be seen as relevant..within reason.

  9. My heart breaks for these fools, when you dig your own grave, you have to lay it.

  10. The “banker who’s lost all sense of financial perspective and can’t make ends meet on a 1m quid..” should be kicked out of the industry and go back to school for money management 101. Stop deluding yourselves that the world need your services.

    As Kiyosaki would put it – mindless employees buying doodads, trying to keep up with the Joneses, and getting into bad debt. That’s not smart, that’s idiocy.

  11. Cry me a river. You are a coward and a tool if you can’t live your life with out worrying what other people are saying. Many people in America live under the poverty line, $17k and these douche bags are crying that their 600k is not enough. These people need to be taken to the wood shed.

  12. Idiot is the only word that describes bankers. I am delighted to see the carnage that has been going on among them in recent years. Brainless idiots.

  13. I make $50,000 a year, live in NYC and am able to save money. I just don’t spend it on frivolous things. You’d be surprised how much money you can save when you don’t smoke, don’t drink and don’t do drugs.

  14. How about taking the same advice that is given to the poor, stop spending your money on drugs, move to a smaller property, increase your work hours or get a second job.

  15. Wait – the people who are supposed to manage other people’s money can’t manage their own? Can’t delay gratification and simply say “No” to having more than one house or super expensive private schools?

    I live near a wealthy area and teach at the high school there. I have never met such unhappy people especially compared to the blue collar neighborhood where I live. It is because of the constant stress of always trying to keep up with others.

    We tell kids to say no to drugs. How about teaching grownups to say no to materialism?

  16. These *are* the same people who want Austerity as the answer for everyone else’s overspending, right?

    I think I could be pretty austere on $1,000,000.00+ per annum, no matter who my “peer group” is.

  17. geez what are we animals?!! how do you expect someone to live on such a small salary? It’s almost as if you would some sort of schooling or experience in finance or money management in order to not go bankrupt on only $1.5m a year!

    But in all serious folks, if you work in finance, or as a banker, or in economics, and you go bankrupt while living on that large of a salary? you shouldn’t be fired, and never be allowed to work in that career again. There is only one of two causes for this. 1) you are terrible at managing money, and don’t understand finance, or 2) You are more obsessed with maintaining an image of wealth than actually managing it properly, and thus spend more than you can our of pride. Either way you are not capable of managing any sort of money what so ever. period.

  18. You know what would fix the “pressure” to spend? If all their salaries were cut to a reasonable amount…Their only argument is cyclical bullshit.

    “I want to stop smoking, but I’m addicted to cigarettes, so I’d better keep smoking 2 packs a day. Oh well, nothing can be done, move on.”

  19. That’s why I do not trust a banker with my money. If they are unable to invest their own money properly, why should I give them mine?

  20. “Everyone around you has a big mortgage and is sending their children to private schools.”

    And everyone around you manipulated LIBOR and ISDAfix, everybody around you sold toxic assets, everybody is to blame, but themselves!

    Just once more solid evidence of how overpaid these people are without actually delivering any kind of real value/work. These people didn’t get where they are by being “smarter” or more “hard working” than others, they are sheeple born into privilige among other priviliged sheeple. That’s why they don’t even realize how priviliged they are.

    All they can do is follow trends, while not even understanding what generates them, and when it all blows up in their faces they, of course, never saw it coming and somebody else should pay those bills.

    Looking forward to the day when those guys heads gonna dangle from bridges, maybe that’s gonna teach them some “perspective”.

  21. Pingback: Bankers Explain How They Cannot Possibly Live On $1 Million Pay |

  22. My ex boyfriend of 4 years dumped me after he became a successful banker. He was no longer the caring person I used to know. He became an obnoxious jerk who is disgustingly loud at parties and public places. He even looked down on my job and commented on my diet ( I am a director at a Forbes 200 company and weigh only 40kg at that time). Wealth does corrupt a person’s heart and mind.

  23. Sorry to disappoint you, Mausey. Your boyfriend was always a jerk. He just used you, well, needed you, a director at that Forbes 200 company, probably with some financial every day advantages for him. Quite humiliating for one of those big swinging jerks. So when he became that ‘successful’ banker it was just subconscious payback time.

    But then it is also all our own fault too, still doing business with entities, paying our good money to vacuous chicken brains like your ex.

  24. The good news….

    By their early to mid 40s most of these boys ( and a few girls) will have been made redundant in one of the many periodic bloodlettings that are a part of this world

    On top of the long term secular decline in his industry

    The grasshoppers will be out there with a tin cup. The ants can retire in comfort

  25. This would be amusing, except for the fact that every dollar or pound this insecure people hoard for themselves is another that doesn’t trickle down to the folks for whom it would actually make a great difference. How many folks could be fed from the excess they shell out to appease their trophy wives?

  26. ts good to know that the money confiscated from taxpayers/savers through the government’s bank bailouts and currency debasement policies is serving the important cause of protecting these guys standard of living and sense of self worth.

    Quite seriously: when it comes down to it this is the main reason why governments have supported these policies. This article is more illuminating than thousands of others that try and explain/ justify these policies for economic reasons.

  27. Great article Sarah you seem to have struck a vein. I was referred here by the Mark Gongloff’s article in Huffington Post and at this point 11,000 people people had liked it.

  28. Here’s what I want to know. Why do you give a damn? Why does anyone give a damn what they earn and how they spend it? You all accuse them of greed, but does it occur to you that your problem is envy?

    Perhaps they are being greedy, but they aren’t taking money out of your pocket. Their annoying lifestyle isn’t making you poor and unsuccessful. But your naked envy is making you miserable people.

    Let it go. Focus on making your life what you want it to be. Enjoy what you have and if you want more work for it.

  29. This article highlights EVERYTHING that’s wrong with the world.

  30. When the word banker is used, it can mean two things.
    1. the person is a banker owner- ie: the person may have the controlling shares.
    2. The person may be a bank executive making decisions at either the national, provincial or the regional level.

  31. @ Sean D Sorrentino

    People give a damn about what they earn and how they spend it because it affects ALL OF US.

    Financial crisis, recession and austerity say “Hi”!

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