In theory, young people working in the financial services industry should be rich. After all, they’re earning anything from £100k ($152k) to £130k a year by their mid-to-late 20s – far more than anyone any other industry which entails sitting at a desk and staring at a screen.
However, as the sorry story of ex-UBS MD and gambling addict Stuart Jones suggests, not everyone who works in finance has phenomenal wealth. Many spend most of their income as they go along. One of Jones’ victims was Marcus Hurst, a former VP and director in structured products at J.P. Morgan, SocGen, RBS and Merrill Lynch. Jones blew Hurst’s £120k ($183k) of ‘life savings and redundancy money’. That’s a lot, but not necessarily when you’ve been working in banking for 16 years until 2014, as Hurst had (although admittedly he may own a large house in London).
And yet it is possible to save large amounts of money when you work in banking. One associate in IBD told us several people in his team have saved six-figure sums over a three-year period. Here’s how he and other young bankers (speaking anonymously) suggest you do it.
1. Live on the outskirts
Living in central London or Manhattan is expensive. Most of the juniors we spoke to said they live in cheap areas to reduce their rent. “I live in Ealing and I pay around £1.2k a month,” says one private equity junior. “An equivalent place centrally would cost me £2k+ and my tube pass is only £140 each month, so I save money overall.”
2. Don’t live alone
You have no need of your own place when you’re a junior in banking. “Some people live with their parents and don’t pay rent,” says the private equity junior. “Don’t spend cash on rent and always opt for sharing because if you’re junior you’re not going to see your flatmate much anyway,” says the associate. “I only pay £900 a month with a marina view and yet I only live 10 minutes from Bank Station and within walking distance of Canary Wharf. If I lived alone in Canary Wharf or in West London, I’d be paying £1.3k to £1.5k+. Instead, I save the majority of my cash.”
3. Work late to make the most of the free food and travel
If you work past 8pm (although this is getting later), most banks will still allow you to expense a dinner. There are tales of people getting free lobster and steak using this method. If you work past 9pm, you can also get a free taxi home.
4. Attend events to make the most of the free food
“I used to attend Bloomberg events so I could eat dinner when I had no money,” says one ex-structurer.
5. Enjoy the money rather than spending it carelessly
There’s nothing wrong with spending money, but spend it on things you’ll appreciate. “I don’t do careless buys,” says the associate. “I love my watches and will spend £3k+ on one, but I wouldn’t go for an £800 custom made suit.”
6. Choose your vacation wisely
Now that banks are enforcing time out of the office, juniors are compelled to take holidays. “Opt for long holidays,” advises the associate. “Tickets are more expensive to Asia compared to Ibiza but you have better hotels, amazing food and good nightlife at a fraction of the cost. Or you can always choose Greece, which is much more beautiful than Spain/Italy/France and way cheaper.”
7. Use the discount food stores
“I shop at the low cost food stores,” says the structurer. “At Asda [the UK version of Walmart], you can get 1kg of halal chicken for £6. – That’s really good when you’re training on a budget.”
8. Get cheap clothes tailored
“I buy smart casual clothes that I can wear out and to work,” says the structurer. “I buy Gap trousers for £30 and pay £10 to have them tailored so that they fit better. The fit makes your appearance much smarter and this works out much better than buying expensive clothes off the peg.”
9. Use your skills to earn extra money on the side
It’s hard to do a side job if you’re already working an 80-hour week, but some juniors seem to manage it. “You can earn extra money using your skills,” says the structurer. “It might be tutoring, building a website, translating, or offering sports coaching. Never offer to do something for free.”
10. Use vouchers and loyalty cards
One more senior M&A banker says he always use loyalty cards to buy his coffees. The private equity junior says he always uses vouchers when eating out.
11. Don’t waste money on a home internet connection
A rates sales analyst says he saves money by not having a broadband connection in his house. “I have unlimited internet on my phone, which I use for most things. If I do need to use my laptop I simply tether my phone and use that connection which is more than sufficient.”
12. Invest any of your spare money for maximum returns
Finally, most of the young bankers we spoke to were busy maximizing the returns on the money they saved. “Invest your money and go for home runs,” says the associate. “We started in 2012, when markets were lower and were able to double or triple our money. It’s more difficult now that markets are sky high.”
“We invest additional money in peer-to-peer lending platforms to get higher interest rates and our boost disposable income,” adds the private equity junior. “We also make use of tax-free ISA accounts and use them to buy index trackers and stocks.”