When a million isn’t enough: why top bankers are struggling to get by

[qualia]

In theory, a seven figure annual pay packet should be more than enough to live on. In the UK, only the top 1% of income taxpayers earn anything more than £150k according to figures from the Office of National Statistics. In the US, the top 1% of people earn more than $370k according to the Internal Revenue Service. And yet, some bankers in the top bracket are having money troubles.

“It’s really not that unusual to find Wall Street bankers who are close to declaring themselves bankrupt,” said Gary Goldstein, co-founder of U.S. search firm Whitney Partners. “Some people are really struggling.”

Claims that bankers are having problems making ends meet won’t do much to ingratiate them to the public. At last week’s Barclays Annual General Meeting, Joan Woolard, a pensioner from the north of England berated Barclays for overpaying its bankers. Anyone who wanted more than £1m ($1.5m) a year was simply a “greedy b*stard,” said Woolard.

For some people working in financial services, however, £1m is simply what’s needed to cover the cost of living.

“You get a lot of people who have a very expensive lifestyle,” said Louise Cooper, a former Goldman Sachs salesperson and financial analyst at Cooper City. “They will always have a nanny, private schools for the children and they will have a very big expensive house. All of this has to be paid for out of taxable income,” she points out. “With a top tax rate of 45%, this means that you need to be earning nearly double what you’re spending.”

Tax is an issue in the U.S. too. “After tax, your million dollars will be around $600k,” said Goldstein. “Out of that, you get people trying to pay the mortgages on, and maintain houses, in the Hamptons and Manhattan, to put three children through private schools costing $40k a year each, and to pay living costs.”

Why can’t bankers simply ditch the house in the Hamptons and put their children into state run educational establishments? Unfortunately, this seems easier said than done. “When you work in banking, you end up surrounded by people who earn a lot of money,” said Erika Shapiro, a former fixed income saleswoman at Goldman, Citi, Credit Suisse and UBS who became a yoga instructor. “Everyone around you has a big mortgage and is sending their children to private schools.”

“You just get trapped at a certain level of expenditure,” said Tony Greenham, a former investment banker at Barclays and head of finance and business at the New Economics Foundation. “You’re in a peer group which aspires to and achieves a certain standard of house in a certain area, a certain type of holiday home, and certain schooling for your children.”

The social conditioning to spend heavily is insidious and is enforced by bankers’ peers, said Nell Montgomery, an ex-Goldman Sachs sales trader-turned psychotherapist. “People in banking get into a thought process whereby having three children at private schools costing £100k after tax is normal. You hear people saying they’d rather pay for private tutoring than spend £10k on a holiday. It’s a mindset in which things which are not normal come to be perceived as standard,” she said.

Ironically, in light of Woolard’s outpouring at the Barclays AGM, Goldstein said top-earning Barclays bankers are suffering most acutely. “Barclays’ bonuses are so heavily deferred that people there are receiving very little cash,” he said. “They are living on $300k-$400k base salaries, which are halved after tax.” Earlier this year, it emerged that Barclays was deferring100% of all bonuses for its managing directors.

In some cases, the situation is being aggravated by decisions from the past – both in terms of spousal selection and ill-informed borrowing.

Cooper said some of the most impoverished-but-wealthy bankers are those with trophy wives. “You’ll get these guys who turn up at work with the girlfriends they’ve had since university, and then suddenly – once they start making a lot of money – they’ll ditch the old university educated girlfriend and find a much more glamorous and good looking woman that they’ve found through work,” she said. Predictably, Cooper said such wives are high maintenance, expecting expensive handbags, expensive shoes, houses in the right areas, expensive education for their children, jewels, nannies and help. “There are lots of lovely men in the City who’ve been with their wives since they were paupers,” said Cooper. “But there are also some who get trapped in relationships where the deal is that they have to earn a lot of money.”

Trophy wives are an issue on Wall Street as much as London, but Goldstein said U.S. bankers’ woes are being further compounded by foolish borrowing decisions taken during the boom times. “A lot of people borrowed against their stock,” he said. “It was rising by 20%-30% a year and a lot of people borrowed against it to buy a boat or the house in the Hamptons.” Now that stock is worth far less – or, in the case of Lehman or Bear Stearns, nothing at all.

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kind of feel sorry for them now. poor millionaires, just trying to get by like the rest of us.

[Scarecrow]

you're joking right

[cactuscarl]

Kind of makes me sick. Imagine someone on a million dollar salary having a winge to you about money id kick them square in the nuts

[whitewind]

These people have no fucking idea how the real world operates. No wonder our economy is in such a poor state. No wonder they don't understand sustainability. No wonder they don't have time to figure out just what their stupidity is doing to the environment.

Fixed wages for everyone, no matter what they do. Force them into reality and make them realize just the sort of hell everyone has to live for.

Trophy wives ffs. They are as bad but blaming them for picking a trophy husband?

Edit for iPhone spelling

Edited May 2, 2013 by whitewind

[glimpse]

my heart bleeds for the poor canker bunts

[lhb2444]

Tragic.

[bogfrog]

My auntie is a millionaire and she is the most selfish, self-centered, rude, un-empathetic, ignorant, penny-pinching, cheap ass i have ever met.

I don't understand how having such an excess of money reliably makes people so selfish.

It has been very helpful for me to know her and her family while i was growing up though, as they epitomise the saying "money cant bring you happiness"

[botanika]

The man who is happy with nothing is the man who has everything.

[whitewind]

I think the selfishness comes first, leading to miserable lack of generosity and mean spiritedness.

[Distracted]

This sorta shit makes me angry, like a few years ago when I read about a family that was losing their $10k a year government bonus to send their kids to school cause they earned more than $100k a year, had 2 houses, their own business and 3 luxury cars.

BUT THAT 10K A YEAR IS WHAT WAS PUTTING FOOD ON THEIR TABLE OMG, WITHOUT THAT THEY'RE ON THE STREETS FOR SURE.

ugh

[Scarecrow]

This sorta shit makes me angry, like a few years ago when I read about a family that was losing their $10k a year government bonus to send their kids to school cause they earned more than $100k a year, had 2 houses, their own business and 3 luxury cars.

BUT THAT 10K A YEAR IS WHAT WAS PUTTING FOOD ON THEIR TABLE OMG, WITHOUT THAT THEY'RE ON THE STREETS FOR SURE.

ugh

[~shameless~]

Millions suffer increased living costs each year so a hundred or so top level shareholders can see exponential growth each year from their investments, its starting to effect the upper mid class too,

For the filthy rich to be wealthy , the poor need money to spend too.