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Thread: Bonus Withdrawal Puts Bankers in "Malaise"

  1. #1

    Default Bonus Withdrawal Puts Bankers in "Malaise"

    http://finance.yahoo.com/news/bonus-...050100338.html

    "I'm not Zen at all, and when I'm freaking out about the situation, where I'm stuck like a rat in a trap on a highway with no way to get out, it's very hard," Schiff, director of marketing for broker-dealer Euro Pacific Capital Inc., said in an interview. Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country's top 1 percent by income, doesn't cover his family's private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.
    [...]
    "People who don't have money don't understand the stress," said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. "Could you imagine what it's like to say I got three kids in private school, I have to think about pulling them out? How do you do that?"
    [...]
    Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don't save.

    "When their means are cut, they're stuck," said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. "Not so much an issue for me and my wife because we've always saved."
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  2. #2
    As far as I read from here http://en.wikipedia.org/wiki/Income_..._and_tax_rates, that income of 350k would be taxed at rate of 33% so he takes home USD 234,500. I do not know if United States there are social deductions, lets are assume there are not any. So i understand he has 3 kids and a wife, so if the wife does not work he has a household of 5 that needs to survive on 234k per year that is not rich, they are barely out of the poor column obviously a bonus that was probably several times his salary made a world of difference.

  3. #3
    I've got a household of 5 thats surviving quiet nicely on less than 60k
    In the US, poverty for a family of 4 is $22,133

    maybe, hopefully, you were joking?
    "In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

  4. #4
    wow somehow I thought it would at least be per person... In any case yes I worded it poorly obviously you would be able to survive on that but clearly you are not rich and it would be a significant trauma to you if your disposable income is suddenly sliced in half, where is your expenses and long term expense already locked such were structured around say 400,000. You are going to say he should have saved and you are probably right but I can certainly see why this issue would be serious calamity for him.

  5. #5
    The income is many time over sufficient to survive. The problem comes from a lack of forward planning and the commitments that are made expecting income that is no longer coming - a nasty shock for anyone regardless of income.

    Not going to be getting sympathy from me. But the biggest loser from banks not paying bonuses is arguably the taxman.

  6. #6
    not for anyone someone earning 30 million per year suddenly having it reduced to 10 million would be pretty pissed but his quality of life would not be significantly jeopardized.

  7. #7
    Quote Originally Posted by Asmodian View Post
    not for anyone someone earning 30 million per year suddenly having it reduced to 10 million would be pretty pissed but his quality of life would not be significantly jeopardized.
    Don't be absurd.

    If someone has an income of 30mn but pays costs of 29.9mn then where on earth is he supposed to find the missing 19.9mn in order to not "significantly jeopardise" their quality of life? It doesn't matter what numbers you put on it, losing two-thirds of your income overnight will hurth anyone.

  8. #8
    most people on Wall Street don't save.
    What the...

    Quote Originally Posted by Asmodian View Post
    As far as I read from here http://en.wikipedia.org/wiki/Income_..._and_tax_rates, that income of 350k would be taxed at rate of 33% so he takes home USD 234,500. I do not know if United States there are social deductions, lets are assume there are not any. So i understand he has 3 kids and a wife, so if the wife does not work he has a household of 5 that needs to survive on 234k per year that is not rich, they are barely out of the poor column obviously a bonus that was probably several times his salary made a world of difference.
    Er. Irony? Deductions or no deductions, his expenses and assets (eg. private school tuition, extra apartment, huge super-expensive apartment, shares, whatever he spends on maintaining his lifestyle etc) seem high enough to put him far away from the poor column. If he didn't have those expenses, why, he'd be rich! I'm also not sure how a person can both be among the top 1% of earners and still be poor, unless he spends far too much money.

    Not making any value judgements, and I know that these changes make their lives even more stressful than usual, just saying something about your reasoning seems off.
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  9. #9
    Private schools in New York can easily cost $40k. Times that by 3 children, and you're spending $120k. A mortgage for a large house in Brooklyn (I assume in a nice area) can easily run $100-200k a year. Add a car, parking, etc. and now you're not in very good shape. Not that I feel overly sorry for the guy, but it's not easy to suddenly stop sending your kids to a private school, to sell your house, and to otherwise change all your spending habits.
    Hope is the denial of reality

  10. #10
    Hmm. On the one hand, it's clear that plenty of people are clueless when it comes to talking about their income (lots of quotes of these 'poor' bankers can set anyone's teeth on edge), but it's not completely unreasonable for them to be feeling the pinch. Yes, it's their fault to the extent that one should never rely on bonus salary to fund required commitments - no one is disputing that.

    But - I do think that it's not completely unreasonable for someone making $350k to be feeling a pinch in their cashflow. A lot has to do with where they live - housing costs are astronomical there - and their choice to send children to private school. I'll agree it's a choice, but it's hardly an unreasonable one - most parents would like to provide the best education possible for their children, so I can't fault them for them sending their kids to one of the best (albeit most expensive) schools.

    It's easy to live on a fraction of his income if you're living somewhere with low housing costs and you're willing to use public education. But I know from personal experience that you need a lot of income to support a family in other circumstances. Figure a cheap private school (or, for that matter, childcare for younger kids) will set you back about $25k/child, plus extracurriculars and summers (add another $5k or more?). If you have a family of 3 kids (not uncommon in the US), that's $90k in post-tax income right off the bat. Housing costs in areas which pay high incomes (mostly CA, NYC area, Boston, a few other places) are quite high - you can easily end up paying $10k/month for even fairly modest accommodations, between mortgage, property tax, and upkeep (that banker had a 1200 sq ft house, which is hardly huge). So you're now talking over $200k in post tax money just for your education and housing. That's not talking about transportation costs, food, entertainment, vacations, etc. Even fairly modest requirements can push your spending pretty high if you live in an expensive enough area. If you save at all for retirement, figure you're taking another 10-15% bite out of your paycheck, and pretty soon you're not looking at that much money left over from a $350k salary.

    I am NOT suggesting that these people are poor, or that we should feel bad for the plight of the poor benighted banker. I'm just saying that it's not unreasonable to have money concerns even on that kind of salary - and that said concerns are not driven by greed or a lavish lifestyle, but by a fairly understandable set of choices (prioritizing education, living in a home near work). My wife and I combined make somewhere around the 95th percentile in household income in the US (very roughly - I haven't looked up the latest data). Obviously we're not poor, but we're hardly rich either. It'll be years before we can afford a home (and we're currently shoveling a huge amount of cash into a rental), and we have no idea how to pay for children once we have them - it'll cost $20-30k just to send them to a decent daycare, let alone actual schooling. We don't take lavish vacations, go out of the town a lot (except for cheap/free events), or anything else. It's not unreasonable for high earners to feel the pinch of a budget. The ire directed against the 1% is a bit misplaced - the people who are really 'megarich' are in the 0.1%; most of the 1% are people just trying to get by, especially in more expensive areas.

  11. #11
    most people on Wall Street don't save.
    This isn't limited to people on Wall Street. I've had some conversations with coworkers lately that revealed that most people here are somehow spending almost as much or as much as they take in. That kind of financial irresponsibility is appalling to me, but I'm coming to learn that it's the norm.

  12. #12
    Don't be absurd.
    If someone has an income of 30mn but pays costs of 29.9mn then where on earth is he supposed to find the missing 19.9mn in order to not "significantly jeopardise" their quality of life? It doesn't matter what numbers you put on it, losing two-thirds of your income overnight will hurth anyone.
    Yes but these expenses would be something like credit, maintenance payments on his private jet which he could fairly easily sell and still travel everywhere via the private jet of the same quality. I.E. he would have to restructure his expenses without significantly changing his quality of life.


    Er. Irony? Deductions or no deductions, his expenses and assets (eg. private school tuition, extra apartment, huge super-expensive apartment, shares, whatever he spends on maintaining his lifestyle etc) seem high enough to put him far away from the poor column. If he didn't have those expenses, why, he'd be rich! I'm also not sure how a person can both be among the top 1% of earners and still be poor, unless he spends far too much money.

    Not making any value judgements, and I know that these changes make their lives even more stressful than usual, just saying something about your reasoning seems off.

    I don't see how you can call 47k per person rich, you realize as an executive he is expected to dress accordingly, I expect he spends at least 30k a year on his wardrobe and it is expected of him in the position he occupies. And then there is his wife, which is expected to attend company events have you any idea what designer clothes cost. They are not essentials to survive and god knows i dress in jeans most of the time but someone who works in front office of a financial company can not afford to do that, its part of the cost of keeping his job.

    I suppose definition of rich is different, for me it starts at the points where you own a large house in a good area luxury car and can afford not to care about how much food, clothes, tuition for your kids cost. You are hesitating weather you can afford to buy that yacht and park it in Monaco that is rich. The guy with family of 5 earning 350k is doing ok at best

  13. #13
    Quote Originally Posted by wiggin View Post
    I'll agree it's a choice
    Thats an awfully nice way to say they are living outside their means. Anyone can make the choice to behave like that. But I also understand how people can get annoyed when people like the one in the OP show a clear lack on understanding in how to cut expenses and stop behaving as they are.
    40k for school, 25k for daycare da fuc
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  14. #14
    If you could afford to get your children a better education, you wouldn't spend the money on it?
    Hope is the denial of reality

  15. #15
    If I could afford it I would, except this guy couldn't and he didn't know that because of bad budgeting, and now he wants to complain about it and act like there are no other options.
    "In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

  16. #16
    Um, he could when he was getting the larger bonuses.
    Hope is the denial of reality

  17. #17
    Quote Originally Posted by Ominous Gamer View Post
    If I could afford it I would, except this guy couldn't and he didn't know that because of bad budgeting, and now he wants to complain about it and act like there are no other options.
    Yes he could.

  18. #18
    Quote Originally Posted by Wraith View Post
    This isn't limited to people on Wall Street. I've had some conversations with coworkers lately that revealed that most people here are somehow spending almost as much or as much as they take in. That kind of financial irresponsibility is appalling to me, but I'm coming to learn that it's the norm.
    Yep. News alert--even Wall Street traders/brokers/financiers can be guilty of the same thing poor and middle class folks have been criticized for---living beyond their means, and not saving enough. That means not buying a house before there's a years' worth of income in a rainy day fund. That means budgeting on the outside chance one person loses their job, and one income has to support the family. That means not considering "bonus pay" as part of base pay, or expecting raises every year.

    What's sorta sad is hearing this kind of sour grapes from people who work in the financial industry, and 'should know better' than the average joe.

  19. #19
    De Oppresso Liber CitizenCain's Avatar
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    Yeah, $350,000 isn't "rich" for NYC. He's definitely upper-middle class, and living beyond his means... but that's true of anyone in the "middle class." Debt. You find your income cut in half, and you'll have trouble paying your debts without, for example, selling your car, or your home or pulling your kids out of private school. That's the one nice thing about living in the Midwest. I can live as well as someone out in Cali or NYC or one of those hellholes who pulls in 5 times my income (and pays a much higher income tax rate to boot). Cost of living, bitches!!

    And of course, the other thing, is that it's not these bankers (the ones making low 6 figures) that were the ones responsible for the mess their institutions are in. They did their jobs, and followed the policies set by the executives and upper-level managers... which turned out to be horribly crafted policies that cost the banks lots of money. But of course, it's not like the execs are about to save money by docking their own pay, so it's the people who actually work for a living that suffer, same as everywhere else.
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  20. #20
    Quote Originally Posted by RandBlade View Post
    Yes he could.
    This is purely from personal experience, but I don't consider budgeting bonuses into long term plans, like education, to be good planning. Its just a trap in that you are giving yourself the idea of "hey, money, lets committ to something that far exceeds said money."

    Even if you disagree with that, which seems to be the case, the mentality that there are no cheaper options worthy of oneself is the main problem.
    Last edited by Ominous Gamer; 03-01-2012 at 06:21 PM.
    "In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

  21. #21
    Quote Originally Posted by Ominous Gamer View Post
    This is purely from personal experience, but I don't consider budgeting bonuses into long term plans, like education, to be good planning. Its just a trap in that you are giving yourself the idea of "hey, money, lets committ to something that far exceeds said money."

    Even if you disagree with that, which seems to be the case, the mentally that there are no cheaper options worthy of oneself is the main problem.
    Is it bad planning when you get the same bonus every year?

    Let me see you tell your kids that they have to leave all their friends and put up with an inferior quality of education without being upset over it.
    Hope is the denial of reality

  22. #22
    Quote Originally Posted by Loki View Post
    Is it bad planning when you get the same bonus every year?

    Let me see you tell your kids that they have to leave all their friends and put up with an inferior quality of education without being upset over it.
    I'd agree with OG, it's bad planning. Or delusional on some level. Anyone living in NYC has known since 9/11/01 how quickly things can change. Anyone not asleep for the past five years knows the financial industry isn't immune from lay-offs, or changes in pay structure + bonus.

    It's also not wise to make family decisions based on emotions like "kids leaving all their friends" in prep school. Maybe if more people in upper incomes sent their kids to public schools, and participated in making them better, it wouldn't be considered a move down on the academic ladder.

  23. #23
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    I don't really see where the difference is with people on a significantly lower income who don't live within their means. Seems to me that these people did the same what millions of others did; spending more than they should have. Of course I am the worst of prudes when it comes to debt.
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  24. #24
    De Oppresso Liber CitizenCain's Avatar
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    Quote Originally Posted by GGT View Post
    I'd agree with OG, it's bad planning. Or delusional on some level.
    Now, is this opinion of yours based on the fact that we're talking about an evil j00 here? Would you say the same thing if it was some uneducated retard ("k0mm0n man")? Or would you blame the Republikan party for costing the k0mm0n man his job, instead of assigning blame on the individual in question?

    [That's all rhetorical, BTW. We all know you're just bashing some foolish j00, but would defend an uneducated, unj00ish retard in the same situation.]

    Anyway, planning on having the same bonus you get every year is like planning on having your job every year. You have to include it in your planning, period. This particular guy obviously shouldn't have tried to live so far beyond his means, but planning based on his actual annual income is exactly what you should do - you're just supposed to put something away into saving so if your income drops, or you lose your job, you don't have suddenly worry about selling the cars, the home and pulling the kids out of school.
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  25. #25
    Quote Originally Posted by Asmodian View Post
    I don't see how you can call 47k per person rich


    That's about as much as the median household income in the US, for each person. That's ignoring other assets. Every single person in that household, kids included, could each support a separate household of their own if they [could] split up the money.

    you realize as an executive he is expected to dress accordingly, I expect he spends at least 30k a year on his wardrobe and it is expected of him in the position he occupies. And then there is his wife, which is expected to attend company events have you any idea what designer clothes cost. They are not essentials to survive and god knows i dress in jeans most of the time but someone who works in front office of a financial company can not afford to do that, its part of the cost of keeping his job.
    In that case he must have amassed several tons of very nice clothes. Since it seems he never wears the same clothes twice he may as well sell them for a pretty penny I suppose.

    I suppose definition of rich is different, for me it starts at the points where you own a large house in a good area luxury car and can afford not to care about how much food, clothes, tuition for your kids cost. You are hesitating weather you can afford to buy that yacht and park it in Monaco that is rich. The guy with family of 5 earning 350k is doing ok at best
    This guy is a rich man who has very high expenses and has found himself in a tight spot, albeit not much tighter than that millions of other people are in. Wrt income and wealth he's rich, or at least should/could have been. This is not a commentary on his character or his worth as a human being, I'm just saying that I don't grok your reasoning at all. By no standards ever accepted as reasonable on this forum would this man be justifiably not-rich. I recall people here glossing over the impact of little things like having to uproot your entire family in order to get a job when it came to the poor unfortunate and unemployed. Or dismissing the pressures of constantly having to sacrifice in order to just get by. I suppose I should be glad that the difficulties of human existence--rich or poor--are acknowledged
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  26. #26
    Quote Originally Posted by Ominous Gamer View Post
    Thats an awfully nice way to say they are living outside their means. Anyone can make the choice to behave like that. But I also understand how people can get annoyed when people like the one in the OP show a clear lack on understanding in how to cut expenses and stop behaving as they are.
    40k for school, 25k for daycare da fuc
    I agree in principle with you about this guy - I agree that one should never factor bonus income into basic budget-making. And if I were him, I'd lose the summer home in CT and cut a few other corners until bonuses come back. But the underlying rhetoric about people like him - that they have far more income than necessary - is not really all that true. I strongly suspect that the majority of his income is tied up in fairly understandable and reasonable expenses - better education for his kids and housing being by far the two largest.

    You may find $25k daycare to be expensive from your comfortably cheap area (or if you have a spouse who doesn't work), but it is quite normal in some states - in Massachusetts, for example, average daycare cost across the entire state is nearly $19k last year (that's including much cheaper rural areas - just imagine what it's like in Boston). Average across the whole country is $11.5k, which isn't cheap either. In expensive cities it can easily approach the high 20s for anything approaching decent daycare.

    School there's a bit more flexibility, since there's always the cheap option of public schooling, but even 'cheap' private schools in most cities cost over $20k, and the better class of schools in more expensive cities are easily into the 30s. This is not surprising, and I'm frankly not upset that the banker in question cares enough about his kids to give them the best education available.

    Quote Originally Posted by Minx
    This guy is a rich man who has very high expenses and has found himself in a tight spot, albeit not much tighter than that millions of other people are in. Wrt income and wealth he's rich, or at least should/could have been. This is not a commentary on his character or his worth as a human being, I'm just saying that I don't grok your reasoning at all. By no standards ever accepted as reasonable on this forum would this man be justifiably not-rich. I recall people here glossing over the impact of little things like having to uproot your entire family in order to get a job when it came to the poor unfortunate and unemployed. Or dismissing the pressures of constantly having to sacrifice in order to just get by. I suppose I should be glad that the difficulties of human existence--rich or poor--are acknowledged
    You're confusing wealth with income... but I do want to agree with the subtext that these problems are hardly limited to the high income brackets. There is one unique aspect of higher income brackets - their income tends to fluctuate a lot more than people whose main source of income is a basic salary. This is why using taxes on the rich to fund spending is often a perilous suggestion, as we have seen in CA. It's very hard to plan financially when income (e.g. a bonus) you previously thought had a certain floor suddenly disappears, or if stock options are no longer awarded, or whatever. I don't feel too bad for them, obviously, but I wouldn't want to try to set up a budget where your income could go anywhere from a base that barely pays the bills to triple that... without having any control over the fluctuation.

  27. #27
    De Oppresso Liber CitizenCain's Avatar
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    Quote Originally Posted by Aimless View Post


    That's about as much as the median household income in the US, for each person. That's ignoring other assets. Every single person in that household, kids included, could each support a separate household of their own if they [could] split up the money.
    And what's the median cost of living in the US? Hint: NYC (and certain other locations) have such high cost of living that being considered middle class requires a six-figure annual income. He's not rich. Upper-middle class, at best. And in NYC, upper-middle class is generally mid-six figures and up, not low six figures and up.
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  28. #28
    Stingy DM Veldan Rath's Avatar
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    Planning on bonuses IS bad planning...it's a bonus, not a guarantee.

    Better Half gets a monthly bonus based upon how well his district does...I DO NOT calculate into the budget as one bad week of sales can kill it.
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  29. #29
    Quote Originally Posted by Loki View Post
    Is it bad planning when you get the same bonus every year?
    Then you budget in a way where the bonus is used for nonrecurring expenses. Cars, outfits, supplies, whatever. At worst, that bonus should be your savings.
    You don't use it for something you can't shuffle into a lower priority when the need comes.
    Let me see you tell your kids that they have to leave all their friends without being upset over it.
    Being upset is understandable, but be upset at yourself for poor planning, not at the world by acting like a spoiled bitch during an interview.
    "In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

  30. #30
    Quote Originally Posted by CitizenCain View Post
    Now, is this opinion of yours based on the fact that we're talking about an evil j00 here? Would you say the same thing if it was some uneducated retard ("k0mm0n man")? Or would you blame the Republikan party for costing the k0mm0n man his job, instead of assigning blame on the individual in question?

    [That's all rhetorical, BTW. We all know you're just bashing some foolish j00, but would defend an uneducated, unj00ish retard in the same situation.]

    Anyway, planning on having the same bonus you get every year is like planning on having your job every year. You have to include it in your planning, period. This particular guy obviously shouldn't have tried to live so far beyond his means, but planning based on his actual annual income is exactly what you should do - you're just supposed to put something away into saving so if your income drops, or you lose your job, you don't have suddenly worry about selling the cars, the home and pulling the kids out of school.
    Stop trolling. Or expand your "debate" to include wiggin, Hazir and Veldan, who also say bonuses shouldn't be considered the same as base salary.

    Those who get holiday or year-end bonuses know they're not guaranteed amounts and fluctuate depending on other factors. People who work in finance also negotiate their salary and perks, know the difference between wages and stock options, and how to tax their income at the 15% capital gains rate--by claiming their title "advisor or consultant" as a value-added service, and exploiting carried interest trades. That's not a condemnation of bankers and Wall Street, but an example of our fubar tax code.

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