Even on Wall Street, everyone likes spending more than paying down debt
I was making $24,000 a year in 1994 as a sales assistant at Morgan Stanley. I was also $10,000 in debt, courtesy of MasterCard and Visa’s generous credit lines. But I had hope because it was December… and that meant Bonus Season was upon us.
Excited and nervous, I marched across the trading floor to the big conference room. It was time to find out what my worth was on Wall Street.
As I took a seat across from my boss, she told me the firm was paying me a $2,000 bonus. Then she asked if I was happy.
I tried to smile, but it was hard for me to catch my breath. That was a lot of money. I wagged my head back and forth trying to get the word “thanks” out. It must have looked to her like I was shrugging her off because she said, “How about three?” so quickly it took the rest of the air out of my lungs.
Later that night, I took a cab instead of the subway and I treated five of my friends to dinner. We ended up celebrating at a bar called Café Wha? Round after round was followed by shots of Goldschläger. Then the check came… for just over $900.
The next morning, I realized that I’d spent almost 30% of my bonus in less than 12 hours. My second realization was that actually I spent closer to 50% of it since my bonus would be taxed.
There are some people who like to save, pay down debt, and re-invest wisely. For those folks, this experience might have been a realization for the next bonus…
Unfortunately, I was not one of them.
For the next decade, my bonuses only increased – higher and higher. Of course, my spending intensified as well.
One year, I treated myself to $10,000 on bedding at ABC Carpet – not a bed, bedding… $25,000 on my daughter’s first birthday with a yacht cruising around Manhattan… and another $25,000 on my birthday party with Naughty by Nature performing a set. And I was always comfortable carrying some debt because, well, why not?
By 2004, I sat alone on the couch in my 2,700-square-foot Tribeca apartment when I called to find out about my bonus. And voilà, I had received a $2 million bonus for the year.
I immediately started to figure out ways to spend it… I produced an up-and-coming rapper, bought a race horse, and wrote and executive-produced two short films. The next year I invested a million dollars in casual- dining burger joint Fatburger, and bought both a loft in the city and a 100-year-old home on the North Shore of Long Island.
As a Wall Street career progresses, so do the expenses. The spouse wants to upsize the house, the kids suddenly need a private school education and eventually they go to college, perhaps you’re having an affair with someone in the intern program – all of which means you need more money. And just because you’re making a lot of money it doesn’t mean you don’t have some debt.
It’s hard not to spend money when you get a large cash infusion into your account. Even when you have a mortgage, a home equity loan, and credit cards hanging over you like a dark cloud. When you look at your balance and see all of those zeros, the natural instinct for many is to spend, spend, spend.
Here are some of the most unwise financial decisions from financial folks right after bonus season…
Michael, sales trader, self-proclaimed lacrosse legend, and claims he only goes to Vegas six times a year
When I got my first six-figure bonus, I was ecstatic. I couldn’t believe it. I still had student loans to pay off, but I didn’t care because I assumed I’d make double the next year.
So I used half of my bonus to invest at a new restaurant/bar that was opening up in the Lower East Side of Manhattan. The area was hot, so I figured it’d be a fun and a good investment. I loved the idea of being able to say to a group of people “let’s go to my bar.” I invested the other half of my bonus in an independent film that was supposedly a surefire hit.
The bar closed before I even got my next bonus and the film was never finished. I didn’t see a dime from either investment.
Steven, currency trader, proud he’s never puked at his company’s holiday party, and big believer in bitcoin and blockchain
My expenses were already high because I was carrying two homes, a couple of kids, and a wife with expensive tastes. But this one year I was out on the town with a couple of mates right after we got paid.
It was good harmless fun until I got separated from the group. I was bloody drunk and found myself alone in one of New York’s finest strip clubs. At first it was glorious – I was in the backroom with several girls drinking champagne. Then the night got away from me. I think the girls slipped something in my drink because I totally blacked out.
It wasn’t until I got my credit card bill that I saw how much I spent – $44,000. There was no way I could expense it to my company, and I was afraid to dispute the charges for fear of my wife finding out.
Daniel, hedge-fund trader, fantasy football aficionado, and thinks his wife secretly hates him (but it’s not a well-kept secret)
My wife didn’t speak to me for six weeks. She wanted me to put the extra money towards our house because the value of it has decreased since we had bought it.
But I’d always dreamed of having a mini Fenway Park in my backyard, so construction started right after bonus season. It took several months to build, with a batting cage, full basketball court, and a beautiful Wiffle ball field. And my kids love it – we play all the time.
I know some people in the construction business, so it only cost me $50,000. But unfortunately, the value of our home has gone even lower and a real estate agent told us the complex added zero to the resale value. In fact, it makes it harder for us to sell.
Wendy, research analyst, big college football fan, and can trade locker-room stories with the best of them (currently looking for a job)
When I was 30 years old, I realized I didn’t own anything and freaked out. So I used my next bonus to buy a car and my first apartment. I was stretching the budget a little bit, but the market looked good and I felt like I had job security.
Then the next year, instead of paying down my debt, I got a little crazy. I was running with a fast crowd and everyone was flying private… I wanted to join the ranks of the Wall Street elite so I purchased flight time with Marquis Jet. It cost me more than $100,000 for 25 hours up in the air. I had fun flying to Miami and back four times that year, but when I lost my job six months later I really needed that money.
Kevin, sales trader, worked his way up from the back office to managing director, and loves handing out bonuses to the guys and girls on his desk
I was 35 years old when I started making real money on Wall Street. Every December I was expecting close to a seven-figure bonus. It was 2005 and I was still single, so most of my expenses were fairly contained. So I started getting into the real estate game. I was buying and selling apartments all over the city.
My bonuses in ‘05, ‘06, and ‘07 all went directly into properties I was buying. But then the financial collapse happened and the credit bubble finally burst. I was long seven properties at the time… And I couldn’t give them away.
It took a couple of years to be free and clear, but essentially it was like I didn’t get paid for three years on Wall Street.
Turney Duff is a former trader at one of the biggest hedge funds in the world, the Galleon Group, where its founder and several Galleon employees were found guilty of insider trading. Turney rose through the ranks and then fell prey to the trappings of Wall Street: money, sex, drugs, alcohol, and power. Turney chronicles his spectacular rise and fall in his bestselling book, The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess.