The biggest allure of joining a Wall Street firm like Goldman Sachs or Morgan Stanley is the ability to make big bucks in a relatively short amount of time. I spent 13 years working in the industry from 1999 – 2012 (GS and CS), and was able to retire at the age of 34 partly because of the healthy pay. This post looks at the average Wall Street bonus amounts over time.
But high pay isn't enough to retire early. One must also make savings an absolutely priority given how easy it is to spend everything we make. We all know plenty of people who make lots of money who have no savings or investment accounts to show for due to their lack of discipline.
Related: Scraping By On $500,000 A Year: Why It's So Hard To Escape The Rat Race
Let's take a look at the average Wall Street bonus over time, as well as various reasons why you might want to work for an investment bank.
The Average Wall Street Bonus Amounts Over Time
As you can see from the chart, Wall Street bonuses have generally trended up since the 1980s. The peak year was 2007, where the average bonus was roughly $180,000 on top of an average $120,000 – $250,000 base salary. Then the financial crisis hit in 2008 – 2009, cutting bonuses almost in half.
Although we're eight years past the financial crisis, average Wall Street bonuses have not returned to peak levels due to a continued compression in trading fees, a decline in IPOs, and a lack of M&A frenzy as we saw in the 1980s and 1990s.
That said, an average bonus of $140,000 is still pretty good for most people! You just have to sacrifice 60+ hours a week and a lot of your health to get there.
First-year analysts at Goldman Sachs and Morgan Stanley are now making $110,000 and $100,000, respectively, as of 2021. Business is booming!
Main Reasons For Working On Wall Street
Now that you know the average Wall Street bonus amounts, let's look in more detail why you may want to work on Wall Street.
1. You get to make a solid income.
Let's address the elephant in the room first. Today, analysts right out of college make a base salary of $80,000 and a first year bonus well over $25,000 when joining a major firm.
When I left in 2012, a Director level salary was $250,000 on average, and a Managing Director salary was $400,000 – $450,000. That's a lot of money, especially since bonuses can easily equal 1-2X your salary in a normal year.
2. You learn how to work under pressure.
Whether it's working a large order for a tier 1 institutional client, trying to rank in the top three in their latest broker vote, or getting a request to go back into the office at 11:30pm to finish a pitch, working on Wall Street toughens you up so that anything you do afterward becomes easily manageable.
You begin to thrive under pressure, making you a valuable asset if you want to join a startup, a sports team, or any organization where production or death is the requirement.
3. You build a tremendous amount of endurance and tenacity.
Wall Street is famous for working their analysts and associates 80 – 100 hours a week. After a couple years of working such long hours, you start building an endurance. Many people give up way to0 early before the good stuff begins to happen. They can't take the rejections, the pressure, the late nights, and the early mornings.
Once you regularly work 12+ hour days, you'll be able to produce so much more than your competitors in many other industries. I credit my 13-years on Wall Street with providing me enough grit to publish 3X a week since 2009 on Financial Samurai.
The secret to your success is really demonstrating grit for 10+ years. Financial Samurai now earns more than a Wall Street Managing Director. What's more, Financial Samurai requires a lot less work and is a lot more helpful to society with over 1 million visitors a month.
4. You deepen your knowledge.
In order to be good at your job on the front lines, you've got to be knowledgeable about economics, politics, companies, and investing. You've got to know your stuff if you want to add value for clients. Otherwise, they'll just do a deal with the next gung ho person at another firm.
Because there's always something new to learn, there's always a new challenge. When you're constantly feeling challenged, you're motivated to do much more. There was something new to learn every day I came into the office.
5. You'll become a better communicator.
It's eat what you kill after getting past the first several years as a financial analyst. If you produce nothing, you won't get paid, nor will you get promoted. You'll probably lose your job if you're not a consistent producer.
Wall Street forces you to interact with intense people who are often very smart. By being a better communicator, you'll meet more people, develop more friendships, and stand up for yourself better during any negotiation process. Emotional intelligence is very important folks!
6. You gain access to private investments.
When I was working at Goldman, there was always some type of investment employees could invest in alongside institutional investors. Unless you had millions of dollars, you probably wouldn't get the opportunity.
For example, I was able to invest in the Andor hedge fund that actually went up a lot during the dotcom bubble given they were net short. It saved my retirement portfolio at the time.
A high average Wall Street bonus enables you to become an accredited investor with more opportunities.
7. You might become a better investor.
When all you do every day is think about how to make your clients money through investments, it's likely you will also become a better investor with your own money. Because I've been trained to look for specific things in each company or offering, I may often see investments much differently from my friends who haven't worked in finance.
As a result, while others may let their savings sit in a money market account, I'm more confident deploying my capital. Over time, the capital may grow much greater than the average non-finance person.
My portfolio has outperformed the S&P 500 almost every year since 2002. In 2020, my investment portfolio returned 40% while the S&P 500 returned 18%.
8. You appreciate life more once you leave.
The public hates Wall Street just like it hates members of Congress. You can have absolutely nothing to do with the latest crisis, yet you are still blamed for all the latest economic woes.
People will mistake you for the CEOs and top lieutenants who make the mega millions. It can be very demoralizing. Having experienced hatred, you appreciate life after Wall Street much more when people just treat you like a normal person.
Not working on Wall Street anymore feels great. Every day feels like a walk in the park compared to Wall Street's grueling hours.
9. You gain a lot of optionality.
Making lots of money is nice, but gaining the optionality to do more things is even better. If you are able to avoid the temptation of spending like a crazy person, after just 10 years of work, you're probably a millionaire.
Once you have meaningful savings, you can explore new occupations, spend more time with family, or launch your own initiative. You might even be able to start a personal finance blog that gains a modest following!
10. You learn how to be independent.
Because you're so used to eating what you kill, you no longer rely on anybody to survive. Independence allows other people to live their lives the way they want without having you be their responsibility.
11. You can provide a comfortable life for your family.
Assuming you finally leave, or have enough time to spend with your family, the money you make can be used to secure your family's financial future – maybe even multi-generational financial security.
The one thing about having money is not stressing as much about money. Being able to take care of your parents and help provide them a better life is priceless. Being able to donate both your time and money to helping other people is also very rewarding.
As a father of two young children now, I really appreciate being able to earn and save a lot of money while I was working on Wall Street. The knowledge I garnered also enabled me to write with confidence on Financial Samurai.
The Negatives Of Working On Wall Street
If you want to know about the cons of working on Wall Street, that's easy. People who don't know better will automatically think you're a thief thanks to movies like The Wolf of Wall Street and Boiler Room. You have to explain to them that such firms are bucket shops where no decent person goes to work.
But they will still lump everybody together because it's easier to find an enemy than a friend. You'll probably get fat and develop some sort of health problem if you work more than a couple years on Wall Street. The stress will shorten your lifespan if you don't get out before you die. You you may very well die on the job due to all the hours, stress, and pressure to succeed!
The Average Bonus Amount On Wall Street Is Good
Due to the financial crisis, outrageous Hollywood movies featuring crooks from bucket shops (no qualified person works at Stratton Oakmont), and folks with eye popping salaries, there will probably always be a stigma attached to working on Wall Street. When people are losing money, it's easy to blame the finance industry. But despite the poor perception, I'd gladly do it all over again for all the reasons above and more.
The average bonus amount on Wall Street is far greater than most other industries. If you can survive for 10 years on Wall Street, you'll likely be set for a long time.
Providing capital is essential to a healthy functioning global economy. Companies are often created through fund raising. Markets work due to the liquidity Wall Street firms provide. Thanks to the innovation of ETFs and index funds, retail investors can now buy a plethora of low cost securities for a better retirement.
If it wasn't for 13 years on Wall Street, Financial Samurai wouldn't have been born in 2009. As a reader of this site, you're the beneficiary of all the things I've learned about finance in order to achieve financial freedom sooner. If I had some 9-to-5 job, I'd probably quit writing after a couple years in because it is damn hard to continue writing 1,200+ word articles 3-4X a week for years. But Wall Street conditioned me to keep on going like a juggernaut.
If you're able to get an offer to work on The Street, take it. If you can get a front line job where you're responsible for bringing in the revenue, even better.
Addendum: If you're going to join Wall Street, you might as well get a front office job in sales, trading, or corporate finance. That's where the big bucks can be made. Joining a Wall Street firm to do operations, tech, HR etc won't get you paid, and you'll get all the grief that goes along with working in finance as well. Do finance at a finance firm. Do tech at a tech firm. The average Wall Street bonus is going up.
Related: Should I Work On Wall Street?
Invest In Real Estate To Diversify
When I worked on Wall Street, I consistently invested most of my bonus into real estate to diversify. After all, my career and compensation was already leveraged to the stock market.
If you're interested in a hands off approach to real estate investing, consider investing in a publicly traded REIT or in real estate crowdfunding. My favorite two real estate crowdfunding platforms are:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
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.
Both platforms are free to sign up and explore. I've personally invested $810,000 in real estate crowdfunding to earn passive income and make money in the heartland.