If you want to be happy, don’t make over $400,000 a year at your job. It usually requires long hours and lots of stress to make over $400,000 a year. Any envy about people making high incomes is often misplaced. Earning multiple six-figures doesn’t just come to you.
Further, if President Biden gets his way, he will eventually get around to raising the top federal marginal income tax rate to 39.7%. The combination of long hours, high stress, and higher taxes makes the grind not worth it.
I’m sure some of you who don’t make over $400,000 a year think you’ll happily go through a lot of suffering to make such an elevated income. My hope is that you actually do so you can realize making a top 1% income or even a top 0.1% income is not very fulfilling.
I’m also sure some of you who are currently making over $400,000 a year are happy with your current situation. I mean, who cares about finding love or spending time with your kids when you can make so much money! Zoom calls 8X a day for the win!
For the disbelievers out there who think it’s worthwhile to make $400,000+ from a day job, let me share some insightful feedback from a recent Goldman Sachs analyst survey about their well-being.
Experiencing The Grind At Goldman Sachs
This analyst well-being survey hits home because my first job out of college was at Goldman Sachs in 1999. I worked in the International Equities department on the 49th floor of 1 New York Plaza.
The firm had just gone public, making many of the partners deca-millionaires. I lasted for two years as an analyst before getting the boot. Luckily, I found a job at a competitor before the boot hit my ass.
Curiously, the investment banking industry is still one of the most sought-after industries for college and business school graduates. I would have thought that with stiff competition from big tech and startups, the demand to join banking had faded.
Over the years, I’ve seen the banking industry relax its dress code, forbid working on Saturdays, provide more free perks, and focus more on mental health.
I used to regularly get in by 5:30 am and not leave until 7:00 pm in order to eat some free cafeteria food. I thought the difficult work conditions would have changed. Apparently not!
Investment Banking Analyst Compensation
For most first-year investment banking analysts, the base salary is $85,000. Most analysts will receive a year-end bonus in the range of $65,000-$75,000. Top performers could get a bonus as high as $85,000. Therefore, the all-in compensation for a 23-year-old first-year analyst ranges between $150,000 – $170,000.
Ah hah, no wonder why demand to work in investment banking continues to be so high. Investment banks can still compete quite effectively against tech giants such as Facebook and Google. However, most startups are not the main competitors for talent.
As we know, joining a startup usually makes you poorer rather than richer given most startups go nowhere. You’re just being tricked into making a fortune at a startup because the media loves to only highlight the winners. Banking money is closer to guaranteed money.
Besides, if you’ve just spent $150,000 going to business school and given up two years’ worth of salary, joining a fledgling startup is hard when you could immediately earn $200,000+ in banking.
Perhaps most college graduates would say that making $150,000 – $170,000 after one full year is worth any amount of pain and suffering.
By the time these first-year analysts turn 30, if they survive, they will all likely be earning over $400,000 a year. Banking employees are the perfect target for President Biden’s tax increases. And don’t think for one second it’s only a coincidence Biden makes $400,000 a year as president.
Due to all the pressure of the survey report, Goldman Sachs has bumped first-year analyst salaries from $85,000 to a healthy $110,000 + bonus. That’s a 30% increase in base pay! This is after Morgan Stanley increased its first-year analyst salary to $100,000 in mid-2021.
Let’s take a look at the survey results of Goldman Sachs’ first-year analysts.
Goldman Sachs Misery Survey
One of the biggest misunderstandings some people have about those who make multiple-six figures is they work regular 9-5 hours. In reality, to get on track to make over $400,000 a year by age 30, you will have to work far more hours than the average person.
Therefore, let’s take a look at the average number of hours a Goldman Sachs analyst works in the investment banking division according to the survey.
Hours Worked A Week On Average
Working 98 hours a week on average means working 14-hour days on average. Since Goldman has a no-work-on-Saturday policy, this means analysts are really working closer to 16 hours a day on average. That is one brutal workweek! These analysts would laugh at anybody working only 40 hours a week and complaining why they can’t get ahead.
The 98 hours a week is also on par with the number of hours a stay-at-home parent to a baby or infant works a week. However, for the stay-at-home parent, the stakes are much higher. One look away could mean disaster for the child. At least with the banking analyst’s day, they can go get lunch and shoot the breeze at the physical or virtual water cooler.
The 5 hours of sleep a night average isn’t such a big deal. I’ve been averaging 5-5.5 hours of sleep a night since 1999. After my son was born in 2017, I began waking up between 4 am – 5 am to write in peace before starting the long day of childcare. However, I do take 30 – 45 minute siestas after lunch at least three times a week.
Bottom line: If you want to make multiple six-figures a year for years, you will likely have to work double-digit hour days. Otherwise, your colleague and your competition will pass you by.
Goldman Sachs Analysts Physical And Mental Health
This part of the survey is where I’m most disappointed in the treatment of the analysts. Because the banking business is booming, analysts are working like crazy. However, their physical and mental health is suffering.
Going from a mental health score of 8.8 to 2.8 is shocking. Meanwhile, seeing your physical health decline from 9.0 to 2.3 must mean that you are gaining weight and feeling lots of chronic pain.
My first two years at Goldman Sachs walloped my physical health. I gained 10-15 lbs, had intense allergies, chronic back pain, and plantar fasciitis! WTF?! The happiness of getting a job offer from Goldman went away within the first three months.
I was constantly berated by one of my VPs, Mark W, for not doing something correctly or not knowing something. One day, he yelled, “Even a dog could do this!”
I remember being so stressed that I forgot how to do basic division when asked. When Mark W asked me to crunch some numbers in my head, I froze. I told him I’d be right back. He was miffed. During that time, I ran upstairs to the 50th floor of 1 New York Plaza and asked my Harvard graduate classmate Samir how to do the calculation. Samir eventually went into medicine and became a doctor.
I’m sure many of us have experienced a decline in our mental health since the global pandemic began. Combining the global pandemic with poor treatment at work makes a terrible combination.
Bottom line: If you want to make over $400,000 a year, you will likely have to sacrifice your mental and physical health for years. Remember, your competitors are all gunning for you. If you suffer long enough, you will probably make a lot of money. However, you might be losing months or even years off your life or hurting the quality of your life down the road.
Goldman Sachs Analyst Quotes
Here is actually the first slide I saw when the survey came out. The selected quotes from various analysts seemed so extreme that I initially found them hard to believe. They felt like Goldman Sachs was punking us, like an April Fool’s joke or something.
The two quotes that stood out to me are:
“I’ve been through foster care and this is arguably worse…”
“Being unemployed is less frightening to me than what my body might succumb to if I keep up this lifestyle.”
Based on this feedback, it is understandable why so many first and second-year banking analysts don’t make it to Associate, let alone until 30+ in this business.
For me, I just wanted to last three years as a financial analyst in order to be considered for Associate. However, after two years, I didn’t make the cut. It was only through great luck that I found a new job with a promotion to Associate at a competitor in San Francisco.
Once I got to San Francisco in 2001, life got so much better! The economic environment here was more diverse. There were also a lot more outdoor activities to do given the temperature is mild all year.
One of the first things I did after arriving was go to Golden Gate Park and beat drums in a circle like the hippies once did. Various aromas wafted in the air as we jammed to improvised beats. It was nice to be surrounded by people other than gung-ho finance professionals.
At the same time, I knew that if I could last for at least 10 years, I would accumulate enough money where I wouldn’t have to work again. Therefore, I gutted it out until 2012 before negotiating a severance to be free.
Bottom line: What doesn’t kill you will likely make you stronger. I attribute being able to regularly go from 5 am – 8 pm (until the kids sleep) due to my 13-years working in banking. If you work in banking, management consulting, or big law, you will likely develop sufficient endurance that will help you succeed in your next endeavor. You will also appreciate how much easier life is doing almost anything else compared to banking.
Make Over $400,000 A Year To See What It’s Like
Although I don’t recommend making over $400,000 a year for longer than 10 years due to health reasons, I do recommend trying to make over $400,000 for at least a couple of years. This way, you will gain more perspective. You might even become more empathetic towards those who can’t seem to get ahead making $500,000+. Who am I kidding? Probably not.
The first year you make over $400,000, you will feel proud of your accomplishments, especially if you do so as an entrepreneur. You might even tell your friends, which is a big no-no. With so much pride, you’ll want to see if you can replicate the results for a second year.
After three-to-five years of making over $400,000 a year, you will begin to wear out. The novelty of making a high income will no longer be there. If you’ve saved and invested aggressively during this time, you will naturally start thinking about doing something else more enjoyable.
The Ideal Household Income
Taking things down a notch might seem strange. However, $300,000 – $350,000 a year is all a family of four needs to live a comfortable middle-class lifestyle, even in an expensive big city. When you’re tired of grinding double-digit hours a day, it’s only natural to want to relax more.
At $300,000 – $350,000 a year, you won’t be targeted for further income tax hikes while your mental and physical health suffers. You can buy a regular 3-4-bedroom home to provide for your two children. Saving for retirement should be no problem. Meanwhile, at least one parent will also have more time to spend with the children.
If you want to take things down even further, consider earning a combined household income of $149,999. Under $150,000, the government says you are eligible for $10,200 in tax-free unemployment benefits this year.
In other words, the government is telling us that a household income cutoff of $150,000 will likely be eligible for future government benefits. Just something to think about as you figure out your ideal work/life balance.
If you’re really unhappy making over $400,000, I’d ask your boss if you can take a pay cut in exchange for doing less work. If you’re the boss or partner making over $400,000, I’d raise prices to the point where demand drops by at least 10% to free up more time.
Finally, it’s obviously easier to make $300,000 – $350,000 a year with two working parents than one. However, there are also challenges to be had with regards to childcare. At some point, you will appreciate the value of your time more than the value of money.
Think About How Much Happier Your Children Will Be Too
If you give up on trying to make over $400,000+ a year, you might also reduce the amount of stress you put on yourself as a parent and on your children. The desire to make over $400,000+ a year can often manifest itself in higher expectations for your children. If you are not careful, you might ruin your child’s childhood and your relationship with your child.
Part of the reason why some children study so hard is so that they can get great grades in order to get into the best university possible. The ultimate goal is to land a prestigious job and one day also make lots of money. After all, that’s what mom and dad may have done. Therefore, they don’t want to disappoint you.
Unfortunately, getting into highly-ranked universities and landing high-paying jobs is more competitive than ever. Instead of getting into U Penn, they get into Penn State. A fine school. But is it fine enough if they spent $500,000 of their parent’s money on private grade school?
As a result, many children suffer from intense pressure. Some children resort to destructive behavior that could lead to rebellion or worse.
If parents could be more chill, children could perhaps have a better childhood. Parents could also be more OK with saving money sending their kids to public school and so forth.
Can you imagine how much better life would be if kids went to school for the pure sake of learning and not for getting the highest grades and test scores possible? Children and parents would be happier if the expectations weren’t joining Goldman or McKinsey or bust.
Make Money With Your Investments Instead
As I gear up to return to the early retirement lifestyle once everybody I know is fully inoculated, I’m focused on saving and investing as much money as possible until that time comes.
Not only is investment income taxed at a lower rate than W2 income, investment income also takes little-to-no effort to generate. This double win is great for your health and freedom!
Fingers crossed President Biden doesn’t also raise the long-term capital gains and dividend tax rates. However, it seems like Americans who weren’t eligible to receive any stimulus benefits since the pandemic began will be asked to continue helping out our fellow citizens. After all, debt must eventually be paid back.
Regardless of future tax initiatives, not only will I try and build more passive income, I’ll also find a way to make my active income more passive as well. This will entail finding someone capable to do more of the heavy-lifting at Financial Samurai.
The pandemic has helped some of us focus on building more wealth given fewer outlets of distraction. However, as the global economy reopens, spending more time enjoying life should be priority #1!
Stay On Top Of Your Money
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Favorite Passive Income Investment
The one investment that has helped me escape investing banking the most is real estate. Real estate is my favorite investment because it is a tangible asset that provides utility and generates income.
Today, my real estate portfolio generates over $150,000 in passive income out of roughly $310,000 total.
Given interest rates have come way down, the value of rental income has gone way up. It now takes a lot more capital to generate the same amount of risk-adjusted income.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds and eREITs. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. During times of volatility, Fundrise tends to outperform.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
I’ve personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America.
Readers, is making over $400,000 a year worth it? How have you managed to balance your health and desire to make as much money as possible? What were some ways in which you were able to let go of a high income? Anybody else work at Goldman or currently works at Goldman?