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 🙁
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