The bonus day at the bank recently come and went for another year. So, how best to sum up the atmosphere in the office the day after….
Things have definitely changed in the industry. Gone are the days when significant increases to both base and bonuses are the norm.
These days in the run up to B-Day, there’s a customary round of people disappearing (never to be seen again). If the bonus pool is down (which it always is) then it makes perfect sense for the recipient pool to be drained a bit too. The last few weeks has seen quite a few colleagues get the chop.
In my opinion banking will soon resemble the utility industry. Profits will be effectively capped by regulators, shareholder returns will be smoothed and the risk takers (well those who are still left) will all move to hedge funds. Given the role that big banks play in the world that’s probably a good thing. Will it stop the same clients that lost money in 2008/2009 taking similarly stupid risks in the future…probably not.
Anyway the rights and wrongs of the industry is an argument for another post. More importantly the question that needs to be answered is…
What to do with all the filthy lucre?
Well temptation is all around. While we don’t have particularly extravagant or expensive tastes it’s not hard to catch yourself debating internally with yourself about buying certain things. Below are some obvious and easy ways to spend the doe (with the attempted justifications in brackets where required).
- a new car perhaps? (after all we do drive a sh$tmobile)
- a bigger house (i.e. mortgage) with more bedrooms we won’t use (for that one weekend a year when we have a big bbq and loads of friends to stay over)
- a nice holiday somewhere warm and expensive (well is was snowing this morning)
- a two week binge of coke & hookers(1)
So what is it to be? Well, as the Ermine put so eloquently recently…
Adjusting spending upwards is easy. Adjusting it down is hard.
There speaks a man of experience. He’s on the other side. He’s reached the promised land. A few years ago I got wrapped up in the upward thing, realised the error of my ways, and thankfully nipped it in the bud before things got out of hand.
To get this early retirement stuff right you need to think really hard about what you want.
Sure I’d love a nice 4×4 that makes me feel like a rap star, but I realise that ultimately that’s not going to make me happy (it didn’t for Suge).
Over the last few years I have managed to completely de-tune my brain from associating material goods with pleasure. Prior to Christmas my family were hounding me for ‘ideas’ of what to get me for Christmas. I honestly didn’t want anything and found it incredibly hard to convince people I was being serious!
Despite the worry, talk of ‘doughnuts’ (banking slang for a zero bonus) and redundancies some of us did in fact receive bonuses. Don’t get me wrong, nowhere near this level, nothing obscene by any stretch but a bonus nonetheless, and one I’m very grateful and privileged to receive..
It’s an interesting time of year to walk around the office and glance at the screens of colleagues and hear their hushed conversations on the phone. I’ve seen a couple of people browsing exotic looking holiday destinations online and one chap clearly looking to buy a fancy sports car (despite the fact he lives in central London and will likely never drive it), partially on credit.
However it’s against this consumerist backdrop of seeing/hearing others buying short term happiness with their lot that makes doing the right thing a little harder sometimes. Much like the art of successful investing, doing the right thing sometimes/usually feels a little wrong.
It’s actually quite a revelation when you reach a point where you don’t really want anything. Decisions become so much easier.
So the rather unexciting answer for another year is a balanced mix of the following:
- A simple meal out at the local Italian2
- NISA contributions
- Additional pension contributions
- Mortgage overpayments
The exact ratio/allocation is pretty irrelevant given my generally balanced approach to all things related to financial risk. Sorry to be such a bore!
Notes:
1This one might be the only one my wife isn’t too keen on!
2The meal out won’t be accompanied with Cristal champagne 🙁
Hi UTMT,
I love the sound of a boring investment spread!
I recently benefited from a payout from my regular saver at First Direct. I received £3700 in Jan. Although I didn’t spread my investments across various formats, I decided to pile some of my money together an buy 4 companies instead. It made me think…… I wonder how many people in my position would re-invest the money into shares, cash, property, mortgage? And how many people would be excited by reinvesting it. I think we’re in the minority my friend.
…..and there’s nothing wrong with that!
Cheers
Huw
Huw,
Funnily enough I’ve had two close family members ask me today what it’s all going to get spent on. One in particular couldn’t understand my reply that it wasn’t going to get spent!
Hi UTMT,
Good work there. It’s bonus time around the corner here too and I too am planning on some balanced investment of it. Well done on resisting a cocaine blow out that used to be so rife in our industry 😀
Mr Z
MrZombie,
I joined the industry at exactly the wrong time and missed all of the fun. I’ve heard some great stories of team ‘offsites’ in ski resorts, wild parties, general bad behaviour and excessive jollies etc – not quite up there with the Wolf of Wall St, but a lot more exciting than it is now.
For example, these days in order to minimize any reputational risk we have to all chip in to pay for our Christmas meal/drinks ourselves. The equivalent cost (which would have been expensed a few years ago) gets donated to charity by the firm. The industry has come a long way in a short period of time!
Ah, bonus day – I do miss those having left the financial services industry after 6 years (like you, also in a cost centre rather than revenue generator, ironically in a team that worked on cost savings). Every single one of my bonuses went in full towards mortgage overpayments, while my friends and colleagues were off doing the same things yours seem to be… holidays and cars usually being the prime culprit. While I might not have used any of my bonuses for immediate indulgences, it did finally allow my husband & I to ‘upgrade’ from a flat to a house last year, while keeping the flat to rent out – something all those friends are now apparently jealous of. Good to see someone else also doing the sensible thing!
Frugal Freelancer,
It sounds like you did the right thing all along and are now reaping the rewards. May I ask what you’re up to now….happily retired counting the piles of cash?!
Hi UTMT
Congrats on the bonus and well done on being boring, haha!
In the last 9 years, I’ve received just two bonuses at work. The first one in 2006, I spent it all on a designer watch and a holiday to Gran Canaria. At the time, I had debts to pay but they didn’t see a sniff of the bonus.
The second one (last year), I put 90% of it into my SIPP and treated myself to one item of clothing.
If I get another bonus this year (in March, if it happens), I’ll be chucking it mostly on the boring stuff toop, although for some excitement, I might buy more individual shares haha!
Enjoy your Cristal champagne! 🙂
Hi Weenie,
Glad to see you learnt the error of your ways! Alas no Cristal for us, just a carafe of nice Corvina red wine 🙂
Great news on your bonus – maybe just a little prosecco with your meal? 🙂
I’ve never worked in a job where anyone got bonuses – I’m accustomed to straight down the line public sector pay scales where we’re paid according to the grade of the job, at levels completely transparent to all (they use the SIFA framework in my organisation). The job description defines the salary. When a rise is paid it’s paid to everyone on the scale at the same rate (everyone on my level is getting 2.2% this year – which is better than it has been for the last 3 years).
It must be quite exciting (but maybe a little scary) to live in the world of the bonus. May your pension, NISAs and mortgage thrive and prosper due to your latest one.
Sorry, that should read SFIA Framework – Skills Framework for the Information Age. When I read it back the acronym didn’t sound quite right and google corrected it to “Sofa Framework” – :-))
Cerridwen,
I would much prefer to work in an open environment with transparent pay for all. There is so much suspicion, jealousy and greed in the financial services industry. Also bonuses tend to make for more complicated tax planning!
Congratulations!
I remember the time when I got bonuses. I used to hear the people in the office discussing what they would spend the money on, there were not big bonuses so it would be holidays and deposits on cars, etc…
I haven’t worked anywhere that gives a bonus for some years now. I am glad that when I did get a bonus I spend it on ‘boring’ things like mortgage overpayments — why — because I’m now mortgage free on my residential home and it’s great to have that financial relief of no heavy mortgage payment each month.
I hope my ex-work colleagues enjoy their bonus when it paid this year as given company news they will get one. I can look back and be glad that I spend my bonus wisely. You may not look at it now as a wise decision but in a few years time you will.
Enjoy spending the bonus!
Sparklebee,
Thanks for your comments. It’s great to read the reflections of someone thats been here (where I am now) and is looking back on what they’ve achieved as a result of making the right decisions in the past. Very motivating indeed.
Ahhh the old bonus conundrum!
I have to admit that apart from 2014 all of my bonuses have been spent on things, like doing a bit of the house/flat up, a nice holiday, or putting down a deposit on the house etc (I guess that last one is not that bad!). Managed to stash most of last years away and will be doing the same again this year (if I get one, usually do though). I’ve never been into expensive cars though so have fortunately avoided the urge to splash out on one of those money sucking vamprires!
FIREstarter,
Fingers crossed you get treated well this year!
Cheers. Forgot to say if there was an award for “Best PF blog title of the year” I would say this has already got it wrapped up by the way… ha ha!
hey UTMT,
For a few years I have enjoyed – in my eyes- some nice no bonuses. Most of them were used to reduce the mortgage. I never felt bas about this.
i might hav epinched off here or there a small part to buy a treat for myself. I think that is ok.
Greetz
Amber Tree,
It sounds like you’ve struck the right balance between saving and enjoyment!