Something I don't understand about FIRE-unfriendly but high paying jobs/careers.

[blackomen]

It doesn't take a rocket scientist to understand FIRE: Money in >> Money Out and the difference is saved in your nest egg.

Once your nest egg is enough to support your current lifestyle (plus an additional amount as a "cushion"), you stop working and live off of your nest egg, hopefully as soon as possible.

In theory, if you have a very high paying job, like, say an Investment Banker, you should be able to reach FIRE status very quickly.

But from what I've heard here (at least from some posts a few years ago that I can no longer find and I only recently started revisiting this forum) than this sort of a career is not recommended for someone pursuing FIRE because an investment banker needs to buy a lot of expensive stuff like expensive suits, cars, watches, maybe even houses, etc. to put up the "image" needed to attract clients which justifies paying his exorbitant salaries.

So here's something that doesn't make any logical sense to me here:

If you have a high paying job but you're also being judged by all the luxuries you flaunt and you cannot do your job properly or at least not gain any respect in your job if you don't spend spend spend, then what's the point of earning such a high salary (and the countless hours of toil that goes into it)?  Is the investment banking field essentially a Sham due to this reason that I've pointed out and a lot of people who enter it soon discover that they don't get to "keep" much of the money they earn because they have to spend it on fancy stuff to please others?

Also are there any other high paying fields that are similar to this?  I only recently switched from Finance to Data Science and I feel my current area doesn't have this sort of pressure to spend to please others.

[Cranky]

Some people really like the social parts of a job like that, and plenty of people like expensive stuff. Different priorities from you.

[market timer]

But from what I've heard here (at least from some posts a few years ago that I can no longer find and I only recently started revisiting this forum) than this sort of a career is not recommended for someone pursuing FIRE because an investment banker needs to buy a lot of expensive stuff like expensive suits, cars, watches, maybe even houses, etc. to put up the "image" needed to attract clients which justifies paying his exorbitant salaries.

Suits? Yes, figure $2,000/year for suits and dry cleaning.
Cars? No, not unless you live in the suburbs with kids.
Watches? Not a big deal from what I've seen. Ties and shoes are a little more important. Figure $1,000/year on those.
Houses? No, but most likely you'll spent a lot on rent. Figure $35,000/year.

Socializing is another big expense. Figure $15,000/year on restaurants, bars, and weekend trips.
As for the rest (food, mostly): Figure $20,000/year.

Altogether, we're talking about ~$80K/year on expenses for what I'd consider a typical banking lifestyle for a bachelor.

On the other hand, bankers don't earn all that much until they are fairly senior. A salary guide is here: https://corporatefinanceinstitute.com/resources/careers/compensation/investment-banker-salary/

So it's true that if you are earning $200K/year, you're not really saving all that much after taxes and spending $80K/year. However, if you put in 10 years and have several $400K+ years, you'll be in good shape to FIRE. Actually pulling the plug once you've finally hit your peak earning years is difficult, though.

[Irregular Joe]

I am a senior investment banker.

There really isn't a need to act the way you've described.  I grudgingly own nice suits and shoes, but that's about it on your list.  The suits/shirts last a long time, so I'm not paying for new ones every year.

We rent cars when we travel to see clients. Sometimes we take Uber.  Fancy dinners and golf outings are paid by the company.

Rent is expensive, but that's Manhattan.  I am tied to this city because of the job. I don't own a watch and have no desire for one.  We don't own a car since we live in the city. I take the subway to work.  When we move out in the suburbs (for better public schools), I'll get a used Toyota. Honestly I have no idea what any of my co-workers drive.

As for my compensation... 37% of it goes to taxes,  31% is spent, and 32% is saved.  Our spending is dominated by rent, childcare, and healthcare.  I hope to retire in about 10-12 years before I turn 50.

[big_slacker]

Rent is expensive, but that's Manhattan.

This is the big one IMO. I'm definitely not in IB, but do have a relatively high paying job. One of the big downsides is the near requirement for being in a HCOL city where the corp HQ is. It's not a hard requirement, but people that live elsewhere typically have stalled careers.

That said, it's easy to run the numbers to see if your net is higher in one place vs another or using your example in one career vs another. I'm still here because the retirement fun grows faster. :)

[Linea_Norway]

It doesn't take a rocket scientist to understand FIRE: Money in >> Money Out and the difference is saved in your nest egg.

Once your nest egg is enough to support your current lifestyle (plus an additional amount as a "cushion"), you stop working and live off of your nest egg, hopefully as soon as possible.

In theory, if you have a very high paying job, like, say an Investment Banker, you should be able to reach FIRE status very quickly.

But from what I've heard here (at least from some posts a few years ago that I can no longer find and I only recently started revisiting this forum) than this sort of a career is not recommended for someone pursuing FIRE because an investment banker needs to buy a lot of expensive stuff like expensive suits, cars, watches, maybe even houses, etc. to put up the "image" needed to attract clients which justifies paying his exorbitant salaries.

So here's something that doesn't make any logical sense to me here:

If you have a high paying job but you're also being judged by all the luxuries you flaunt and you cannot do your job properly or at least not gain any respect in your job if you don't spend spend spend, then what's the point of earning such a high salary (and the countless hours of toil that goes into it)?  Is the investment banking field essentially a Sham due to this reason that I've pointed out and a lot of people who enter it soon discover that they don't get to "keep" much of the money they earn because they have to spend it on fancy stuff to please others?

Also are there any other high paying fields that are similar to this?  I only recently switched from Finance to Data Science and I feel my current area doesn't have this sort of pressure to spend to please others.

You didn't mention the student loan cost, which might also be a factor.

For a future student, making a career choice, it is a good idea to calculate the whole picture of what a certain career might cost. A high salary sometimes comes with a cost of a high student loans and maybe years of low paid practice years. And then add the cost of living in a HCOL area, wearing fancy outfits and how much you need to socialize with work-relations at your own cost. It could be that a different career could lead to the same amount of savings. Think of trades versus a medical doctor. But it is also a lot about how you can stand up against your colleague's habits.

[Aelias]

I am a senior investment banker. . . . There really isn't a need to act the way you've described. 

This.  OP states explicitly an assumption I've seen a lot here, that if you must accept a certain lifestyle to compete in certain professions.  But in my experience a) this is totally optional, and largely waived if your work is good, and b) you can fake a lot of that stuff on way less money if you make an effort.

In other words, you don't necessarily need to buy all the way in.  For example, one reference was made to paying a lot for a lavish apartment / home.  But you don't have to invite your business associates to your home . . . ever.  So, just live where you want and if you're going to spend time with them, do it at a restaurant or other outside place.  Way cheaper to occasionally splurge on a chic restaurant (when you can't get the company to pay for it), than pay an exorbitant rent for more house / apartment than you want.  You can buy a relatively small wardrobe of quality pieces (and note!  quality doesn't necessarily mean the very most expensive.  I have a black wool overcoat that I bought 20 years ago at a discount store.  I'll probably die in that coat.)

It is fair to say that there is a certain amount of cultural currency that helps to play the game.  Like, if you're going to have to make conversations with rich people, it helps to know a bit about the circles they run in and their interests.  But, like most people, if you can get them to start talking about themselves and be a good listener, they'll do most of the conversational work for you.  You can also pick up stuff from the media -- figure out what the people you want to work with are reading / listening to / watching and do that.  You can also lean in to a rich-person-friendly interest or hobby you have and do it on the cheap.  Into art?  Look for free/cheap days at your local museums and galleries.  Dig sailing? Read up and watch regattas and  find a mustachian-friendly way to get out on the water.  Mine is food.  I can talk food with just about anyone.  I keep up on it by constantly looking into new cuisines to experiment with and new, interesting ethnic restaurants in our area.

I think, at the heart, it's about moving through the world with confidence.  If you walk into a place like you deserve to be there, a lot of the other stuff falls into place.  If you feel uncomfortable and out of place, you won't interact as well with others, and your business and work may suffer as a result.  And confidence don't cost a thing!

[BicycleB]

@Aelias, great post!

Not an investment banker myself, but the strategies you suggest ring true in other fields too. Very good to read the overall confidence conclusion... seeking to keep that one in mind.

[MaybeBabyMustache]

Not an investment banker, but work in tech in a lucrative area, but one that must be done from the Bay Area. As a result, our COL is extremely high, and we make a lot of money. (My husband is also in tech, slightly less lucrative). Aside from the COL, there are no dress code requirements, and we try to keep our expenses reasonable (again, outside of housing).

[PiobStache]

I think that sometimes myths get created that make the creators and myth believers happy or feel better about themselves.  These myths get created off a few outliers that help support the myth.  So when someone is wishing their paycheque was bigger a handy myth can be consoling.  Those IB people making all that money?  Well, they don't save any of it due to lifestyle!  Heck, even though I make 1/10th what they do I believe I save more.  I'm probably happier than them too.

There's a quote that goes, "Comparison is the thief of joy."  It can be but a real or mythical comparison can also make a person feel better.

[aGracefulStomp]

I agree with a lot of people above - you don't actually need to purchase all the fancy things except for perhaps a nice suit/work clothes. From what I've seen, people use their job titles as an excuse to spend their money ie. "I'm a fancy corporate lawyer and therefore I live the corporate lawyer life of spending a lot on drinks at expensive bars, and going out to nice restaurants".

In saying that, corporate law is such a horrible job that it is very tempting to spend money on luxuries just to make it more bearable. Someone I know phrased this as "job tax" - it's a tax from your high paying but high stress job.

In my view, as long as the job tax is not such a significant portion of the higher pay then it's still worth it. Unfortunately a lot of people let their job tax be nearly the same amount as the extra pay.

I agree with the original poster that it does not make sense for people to spend all their extra income to cope with the job.

It's absolute lunacy.

[soccerluvof4]

I wasn't an investment banker but owned my own business and has customers in almost every state and sat in all sorts of board meeting etc.. I think its hogwash to think you have to be all flashy and all. When I started my business the first thing I swore by was I wasn't going to buy my customers but reward them with good service. My job was so when they went home at night they didn't have to worry about what I was taking care of for them. With the internet and phones to day so much can be done where like the old guy that recently passed on MSNBC you could be sitting in a suit coat and in your boxer shorts. I think if you approach your business like you do your lifestyle being on MMM you will be more successful anyhow. Not to mention I had upwards of  50 employees and fortunately because I rewarded them instead of the customers my % of business expenses was so low I got audited once in 25+ years and I had to pay 425$ for something we didn't pay tax on and we did big ticket sales.
I'd also add a lot of people don't want to work with people they think your getting rich off of. And people like to work with people they think there helping so I think you can find a balance where you can wine and dine but also be smart about it.

[MMMarbleheader]

As an engineer I think part of it is the engineer vs. business major animosity that has existed since college.

[montgomery212]

I think that sometimes myths get created that make the creators and myth believers happy or feel better about themselves.  These myths get created off a few outliers that help support the myth.  So when someone is wishing their paycheque was bigger a handy myth can be consoling.  Those IB people making all that money?  Well, they don't save any of it due to lifestyle!  Heck, even though I make 1/10th what they do I believe I save more.  I'm probably happier than them too.

There's a quote that goes, "Comparison is the thief of joy."  It can be but a real or mythical comparison can also make a person feel better.

THIS. Exactly. OP is kidding himself if he thinks FIRE isn't possible in NYC ibanking so he's better off not in ibanking for that reason.

Having worked in NYC ibanking and law, it's clear you don't understand the industry. You start off making 200k with bonus at least at/before your mid 20s. However, for the first 5 yrs in both industries, you are basically in your office nearly 24-7 working on spreadsheets (IB) or briefs/contracts (law). Very little wining and dining. You aren't wearing $1000 suits. Sure there are impressions being set internally, as the partners need to see you as someone they WILL one day put in front of clients -- so while I wouldn't come in wearing Target or Kohls clothing bc no one does -- when you make 200k+ it isn't that difficult for men to buy a half dozen pairs of pants at Banana Republic or the like and button downs; the women's winter uniform is cashmere sweaters with similar work pants from BR etc. You buy them once, dry clean them, they last a long time and you replace as needed. You don't have to spend thousands per yr or even $1000 per yr on clothing after the initial buying. You're in the office 24-7 so you aren't spending on food bc meals are expensed. You can live wherever you choose bc you're never home anyway -- you don't have to live in a luxury apartment.

Then 5+ yrs into your career, you get more into the "wining and dining" -- i.e. client development. In NYC that means taking clients to events, theater, fancy dinners etc. -- all of which is paid for by the firm including your car ride home at night. No one is coming to your apartment, so you can live wherever you want. Sure you may need/want to add a Brooks Brothers suit or two to your rotation but at that point you've made 200k or 300k+ for 5+ yrs.

Then IF you get to be a senior partner/senior MD who does a TON of the business generation for the firm, THEN you are going to be the one inviting clients etc. to your luxury penthouse or your house in the Hamptons. At that point you're making $1mil+ per yr in comp, so I'm fairly sure you can afford suits and a Mercedes. Reality is however, 99% of people don't get to that level. These careers are up and out -- not everyone gets promoted to the very senior executive role; along the way, many people are pushed out, leave for other jobs, leave for a different lifestyle that doesn't involve 80 hrs/wk, leave to move away from NYC etc.

As for why people in those industries don't FIRE -- same as other industries, they choose to spend. I worked with plenty of lawyers who lived LARGE -- luxury apartments; only shopping at Saks/Bergdorf; $1000 shoes for women; etc. They justified it as -- I'm a corporate lawyer, I HAVE to live this way to be successful. Reality is, ALL of those people became lawyers bc they had nothing better to do, did not want to do it, hated the work/hours/etc. so they kept themselves "happy" with the best things NYC offers. Some did not even have 401ks -- despite making 200k+ starting at age 25 and being single. Not surprisingly, their firms asked them to leave within 3-4 yrs bc they just couldn't handle the job. They still landed good salaried jobs at 100k+ or 150k+ and NOW in their mid 30s, they are focusing on 401ks etc. Sure you can save at 150k, but reality is it would've been a LOT easier to front load savings/investments when you made 250k.

[honeybbq]

There's an expense associated with any career, really. While there are hacks, there are some limitations.

In high paying jobs and careers, one may find themselves relying on spending in order to compensate for demands associated with the career- i.e. working late and taking a cab home so you can see your kids before they go to sleep instead of biking, having a house closer to work that is more expensive so your commute isn't as long, having to have after care or extended day care for your children so you can work flexible hours, having to work late so buying a dinner out, outsourcing some home owner tasks like lawn mowing or cleaning since you work long hours, etc. Of course all these are a "choice" but in reality in order to have some balance, sometimes you have to pay for it.

I also have to dress nice for work. Now this can be done cheaply for the most part, but compared to someone who doesn't work at all, it is at the minimum a fairly sizable expenditure.

In the long run, the career certainly provides more financial gains and in the end is "worth" it, even if there is a cost associated with it. The benefits and salary more than compensate in my experience for any increased costs. That is why it is hard, at least in my mind, to calculate what a FIREd budget would look like. There are so many day-to-day costs I associate with working, it's hard to unwind them.

[JLee]

Saving even 20% of $500k take-home is $100k/year.

You don't need to sustain any particular image once you retire, so there's nothing saying you have to plan for a $400k/yr spend.

I am quite certain it's very possible to live well / have adequate professional appearance without spending that much, but ultimately the point is that a few percent change of a very high income makes a big difference in the amount of dollars saved, and you can dramatically decrease your living costs by relocating when you retire.

[FIRE@50]

There's an expense associated with any career, really.

This reminds me of the first job that I had after college. It was a shitty retail job and I had to pay for my shitty overpriced uniforms out of my shitty paycheck. I'm much rather buy a few nice suits on an investment banker salary.