You might think that bankers are big spenders. It’s true: some are. Many of the most successful, most impressive bankers, however, are not. When they receive their bonuses, the last thing they do is to rush to the Porsche showroom.
In my experience, bankers who really understand the game follow a five step process when their bonuses are announced.
Firstly, they check the amount. They bring out a calculator and reaffirm the amount they received versus the amount they expected based upon metrics like their own performance and the performance of the bank. Then they’ll calculate exactly how much they’ll end up with in their bank accounts. – After all, a lot a bonus is paid in tax. I used to wince when I saw the amount I was paying in tax on my bonus alone: it was what I had dreamed of making for the whole year when I was 22.
Secondly, they decide what to tell their friends, their colleagues and their families. Usually there are three numbers. The true number, which is reserved for family. The high ball, used for friends and colleagues who need to be impressed. And the low ball, used to convince your juniors how underpaid you are.
Thirdly, they’ll update their personal spreadsheet of assets and liabilities. In doing so, they’ll calculate how far they are from their “F#CK YOU” number. This is the number bankers walk around with in their heads. It’s the net worth or liquid assets they need to walk away from the job and do what they really want to do. Knowing you’re getting close to saying “F#CK YOU” is almost better than having the cash. Almost…..
Fourthly – and this happens once the bonuses is banked – they’ll start moving money around. The senior people I know in banking have a kind of paranoia about where their cash is kept. They want to be able to access it, but they also want it to be safe. There’s something cathartic about moving it from one account to another, almost for the sake of it.
The final step is different for everyone and depends upon your life stage and your aspirations. For example, if you’re married with kids, you might want to save some money for the kids’ education. You might also want to keep your spouse happy. – You don’t need a divorce; a 50% haircut on your net worth is not fun.
If you aren’t married, it will be different. You might do something visible for your parents. I know plenty of people who’ve bought their parents new cars. Only after this has happened can you think about what you’ll actually spend your bonus on. At this stage, the options are fairly predictable. They might include a fancy car, a fancy watch, some art, some fancy suits, a brand new apartment of a visible philanthropic donation.
This is how bonus season goes. Next time you see your boss updating a spreadsheet, bear in mind that it might not be directly related to work.
The author is a former Goldman Sachs managing director and blogger at the site What I Learned on Wall Street (WilowWallStreet.com). What I Learnt on Wall Street is an education focused business founded a group of Wall Street veterans from the best firms determined to help the next generation. They just launched: Smart Cuts to the Top, a live course delivered on Jan 24th.
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