Discover your dream Career
For Recruiters

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

Curse of the trophy wife (Photo credit: garryknight)

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."

Browse Investment Banking Jobs from eFinancialCareers

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 deferring 100% 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.

How to learn to live on less 

So what can you do if you're a banker who's lost all sense of financial perspective and can't make ends meet on £1m? Get some perspective, is the widely advocated answer.

"Remember how little you needed to live happily when you were a student," said Oliver James, a clinical psychologist and author of the book 'Affluenza'. "People tend to think of their wants as needs," James added. "But our real needs are actually very basic - you need food, warmth and maybe light, and you need to feel emotionally secure."

The best antidote to over-spending is to retain a single partner for life, said Cooper: it helps put things in context. Alternatively, try cultivating friendships outside of banking. "I always had a lot of hobbies which brought me into contact with people from different walks of life," said Shapiro. "I always knew people who earned £25k-30k a year."

Finally, there's always therapy. Montgomery said a lot of people in banking formed insecure attachments to their parents as children. This makes them overly-competitive and ostentatious, she said. "When you're insecure, you can take refuge in a kind of grandiosity in which you say 'at least I'm earning a lot and going to these kinds of expensive places," said Montgomery. "You can only get over this kind of thing with intense therapy," she added.

Related articles:

The best paid jobs beyond investment banking 

Twenty money saving tips from bankers and their wives

How banking can ruin your body and mind

AUTHORSarah Butcher Global Editor
  • bl
    13 May 2013

    @ Sean D Sorrentino

    People give a damn about what they earn and how they spend it because it affects ALL OF US.

    Financial crisis, recession and austerity say "Hi"!

  • Ca
    8 May 2013

    When the word banker is used, it can mean two things.
    1. the person is a banker owner- ie: the person may have the controlling shares.
    2. The person may be a bank executive making decisions at either the national, provincial or the regional level.

  • bg
    4 May 2013

    This article highlights EVERYTHING that's wrong with the world.

  • Se
    Sean D Sorrentino
    3 May 2013

    Here's what I want to know. Why do you give a damn? Why does anyone give a damn what they earn and how they spend it? You all accuse them of greed, but does it occur to you that your problem is envy?

    Perhaps they are being greedy, but they aren't taking money out of your pocket. Their annoying lifestyle isn't making you poor and unsuccessful. But your naked envy is making you miserable people.

    Let it go. Focus on making your life what you want it to be. Enjoy what you have and if you want more work for it.

  • Bu
    3 May 2013

    Great article Sarah you seem to have struck a vein. I was referred here by the Mark Gongloff's article in Huffington Post and at this point 11,000 people people had liked it.

Sign up to our Newsletter!

Get advice to help you manage and drive your career.

Boost your career

Find thousands of job opportunities by signing up to eFinancialCareers today.
Latest Jobs
State Street Corporation
Secrets Cloud Architect/Engineer
State Street Corporation
Quincy, United States
State Street Corporation
SIEM Routing Engineer
State Street Corporation
Quincy, United States
State Street Corporation
RBAC Product Lead-2
State Street Corporation
Austin, United States
Northern Trust
Wealth Management & Investments Intern - Chicago
Northern Trust
Chicago, United States
Northern Trust
Financial Advisor
Northern Trust
Chicago, United States

Sign up to our Newsletter!

Get advice to help you manage and drive your career.