How to feel financially challenged on a $1m bonus

With bonuses being assailed by the FSA's proposed new liquidity rules, and the Treasury's attempts to persuade bank bosses to moderate this year's bonuses, the chance of earning $1m (627k) this year is receding.

However, even if you are awarded that much, a Huffington Post article offers an interesting perspective on why it is still possible to feel financially oppressed. It's written from a US perspective, so here's a UK version:

· A lot of this year's bonus will be deferred

If you get $1m, at least 50% (and possible 60% under Darling's rules), is likely to be deferred over the following three years. This will reduce the upfront payment to $500k.

· Taxation will take another chunk

If you're based in the City around 122k of that $500k (313k) will go on UK income tax and national insurance; this will increase after April 2010. At current rates, you'll be left with 191k.

· School fees

If you have two children, one at Westminster and one at St. Pauls, you'll need to pay 43k in school fees. You could also pay another 7.5k for school uniform, school skiing holidays and after school activities. You'll be left with 131.5k.

· Mortgage

Got a large house in Kensington? Even if the mortgage is a fraction of its worth, it could still easily be 500k plus. At a 5% interest rate spread over 25 years, that amounts to 2.1k a month on interest only. You'll be left with 105k. Add on bills and council tax and you could easily be down to 90k.

· Costly spouse

KPMG director Andy Weatherall had a wife who cost 15k a month. Your spouse may not be this high maintenance, but at least 2k a month for facials/coffees/gym membership seems reasonable. You will be left with 66k.

· Family holidays

A family holiday at St Lucia in the summer could easily cost in excess of 10k. Add in a few breaks with your spouse, or a skiing holiday, and you will be left with around 50k.

· Mental and physical fitness

Gym membership and visits to a therapist could set you back another 6k.

This will leave 44k. From this, it will be necessary to pay for everything from trips to Waitrose, tailored suits, Christmas and birthday presents, a car, parking tickets, and travel to work. Careful budgeting will therefore be imperative. Fortunately, in year two you should receive an additional $166k (104k net, or 67k net), which should make the situation slightly less awkward.