Working in a high-paying financial sector role shouldn’t necessarily go hand in hand with ostentation. With banks reining in pay – and lunch budgets – the days of swanning into an Aston Martin showroom straight after bonuses are long gone. Instead, bankers are finding happiness living a frugal life.
In times of crisis and cost-cutting, there's a sudden realisation that big bonuses don't bring fulfilment, and financial sector workers are increasingly introspective about how to find happiness, said Dr Michael Sinclair, managing director at the City Psychology Group.
“At a time when people working in the financial sector are vilified, people at the top of their game who have been earning huge sums for years, are now finding their lives lacking in meaning,” he said. “In these circumstances, money is no longer viewed as a source of fulfilment, but becomes something they start to resent.”
High-earning bankers are instead reassessing their values, looking at ways of introducing “random acts of kindness” into their lives, and part of this means living a more frugal life, disassociating the connection between material objects and pleasure, he said.
Nell Montgomery left Goldman Sachs in 2004 and moved to an eight-acre small holding in Norfolk, U.K., where she opened a specialist pork pie business. She now works as an executive coach and psychotherapist at The Preston Associates.
“There’s always been a correlation between price and pleasure in the financial sector, fuelled by peers spending their money on the same expensive holidays, houses or public school fees,” she said. “You lose touch with reality unless you have some way to keep your feet on the ground. I always maintained relationships outside of the financial sector, with family and friends who kept me grounded.”
There are high-profile examples of rich financiers living a frugal life. Warren Buffet famously still lives in the same house in Omaha Nebraska he bought for $31,500 50 years ago. Hedge fund manager David Tepper has no holiday homes, sends all his children to public school and lives in the same modest home he bought in 1991.
Chris Hohn and his wife, Jamie Cooper, who run the philanthropic hedge fund the Children’s Investment Fund, are worth millions but still claim to live frugally: “We’ve never really been into extravagant living and give almost everything to the foundation now,” she said in a 2008 interview. Hohn still lives in a rented house, wears a black Swatch watch he’s had for years and drives a Prius.
Even if you’re not bringing in millions each year, earning a big salary – with a good bonus – in a front-office role at an early age can lead to a tendency to splurge. A first-year investment banking analyst brings in $110k in total compensation on average, according to figures from headhunters Glocap, rising to $170k by year three.
One female associate at an investment bank in Canary Wharf, said it’s “like an explosion at a Tiffany factory” on her desk after bonuses hit the bank, and that her peers compete with sharp suits and flashy shoes. The days of buying yachts, Ferraris and £50,000 food hampers are long-gone, though, she insists.
“There’s a huge amount of competition in the financial sector and this includes outward signs of wealth to show how well they’re doing in their career and how much they’re earning,” said Sinclair. “The problem is, bankers are now realising that this doesn’t improve their sense of well-being.”
Montgomery said that she never bought into the flashy City lifestyle, and that she always preferred spending time with her family and escaping to the countryside at weekends to buying ostentatious objects. “This weekend was my birthday, and I cooked bacon sandwiches on the beach with my family. It’s important to take pleasure in the simple things.”
An expensive lifestyle also means being tied into your job – even if you want to move on to something else. As we’ve mentioned before, as ludicrous as it seems, $1.5m a year often isn’t enough to sustain bankers’ cost of living and some are close to declaring bankruptcy.
Being frugal could, eventually, give you freedom. Chris Arnade was a former Citi prop trader who now documents drug addiction in impoverished areas of New York. He makes little money from this, and told us previously that he’s been living off his savings since quitting the industry: “I drive a car with 150,000 miles on the clock, I don’t wear a watch and I’ve never felt the need to go to a restaurant where eating becomes a work of art,” he said.
Phillip Wollen said that he was living the “jet-setting lifestyle” as a general manager at Citigroup in Australia, but at aged 40 decided to quit the industry, embrace veganism, give 90% of his wealth away to charity and start Winsome Constance Kindness Trust, a philanthropic organisation, which aims to “promote kindness towards all other living beings”.
Wollen still lives a jet-setting lifestyle – giving inspirational speeches across the Asia-Pacific region and so was unavailable for this article. He has said previously, though, that he’s content since giving up banking: “Happy is an odd word. I feel a sense of joy in every second of every day, because I know how precious and fleeting every second of life is. We deprive others of their lives at our own moral peril.”
It is, however, easy to remain sceptical about bankers embracing a life of frugality. Sinclair admits that a lot of people who come to him are only self-reflecting because the bonuses they’ve long come to rely on – both financially and psychologically – are slowly being eroded.
“It’s definitely no longer fashionable to be flashy,” adds Mongomery. “But most banks have massively increased base salaries to offset smaller bonuses. Gratuitous displays of wealth may no longer be happening, but most in the financial sector still live an affluent lifestyle.”