Bonus Withdrawal Puts Bankers in "Malaise"

[wiggin]

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.

[Ominous Gamer]

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

[wiggin]

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.

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.