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Getting by on $1,000,000 a Year in a Recession

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It was a big day for my friend. Mike had just been given his annual bonus at his Wall Street job (financial crisis be damned!) and in total he had made $1m.

We met for lunch. "Congratulations," I told him, "you're a millionaire now."

"I know," he said, "it's my first million. Hopefully I make more, though, next year, because this is ridiculous."

"What do you mean?" I replied. "It's a million dollars. Doesn't that put you in the top 0.001 percent of the entire human race in terms of salary? Particularly in the middle of a financial crisis like this? Anyone else would feel lucky!"

"Ugh. Whatever," pouted Mike. "I'll be lucky if I'm not broke by this time next year."

"C'mon, you never made money like this before. Now you just made a million dollars during the worst economic crisis in 75 years. How can you spend it that quickly?"

"Well, first off, half of that million is in deferred stock compensation," explained Mike, who is a vice-president at a top-tier bank. "So I vest into it over the next five years if I stay at the bank. So I sort of have that money but I can't spend it, and who the hell stays at a job for five years? I'm going to have to figure out how to get someone to pay me a signing bonus eventually that matches what I'm giving up. And if the economy goes south again, what guarantees do I have?

"Second, out of the half a million that's left, count off half to the IRS. That's $250,000 left. My wife wants to upgrade our Hamptons rental. Throw out another $50,000 for next summer.

"I have one kid in kindergarten and another in second grade. When you count private-school tuition, ballet and fencing lessons, that's at least another $60,000 out the window. So now I have $140,000."

My friend, and I'm not exaggerating, loosened his tie. He was having trouble breathing.

"Okay, so now I have about $12,000 a month left here. Well my mortgage is $5,000 a month, and don't think I can sell my 1200 sq. ft. apartment that I bought for $1.4m two years ago because where am I going to move? Brooklyn? Believe me, the prices don't get any better there and all the partners live in Manhattan. No Manhattan, no partnership.

"So now I have $7,000 a month left. And I don't mean to sound like a snob or anything but I do have a housekeeper, babysitters, gym memberships, therapists for me and my wife, plus our couples therapist.

"I don't know where it goes every month, but I know my credit card is being used to pay for it. James, I don't know how to do it.

"Meanwhile, the job is crazy right now. We're pitching every deal out there and every private equity firm is right in there competing with us. We're all using the same pitchbooks and the deals keep getting ratcheted up, but now nobody can get any loans to close a deal. Who knows what bonuses will be next year particularly with all this government pressure? It's a nightmare out there."

We sat there for a few minutes without saying anything. I had known Mike for 15 years. Back in the mid-1990s, we used to go every Monday to a comedy night at the Luna Lounge on Ludlow Street on the Lower East Side. Up-and-coming comedians would perform and every now and then some of those performers would eventually break out with their own slot on Comedy Central or a stand-up show on HBO. It was exciting to see, and after the shows we would always go to El Hat to eat Mexican food.

When Mike got married, he wanted to pay for the wedding himself, which meant he could only invite his parents, his bride's parents and a select few friends, including me, although I was out of town that weekend and had to pass.

A few years later, when he was an associate at the first bank he worked for, he celebrated for a week when he got his first $50,000 cash bonus. It was during the dot-com days and everything was heady. He put it into a wireless highflyer and watched it double, which allowed him to buy his first apartment. Life was good and it seemed then like it would last forever.

"I just have to work harder this year," he suddenly said. "I've gotta really break out of the grind somehow. Else the pressure is going to break my back, you know what I mean?"

"Well, listen," I replied. "I mean, I wish you were happier with this. Can you quit the rat race somehow?" I asked my friend. "It sounds like it's stressing you out."

"Are you kidding? And do what? Make a measly $250,000 at some chop-shop? Sell toothpaste for Procter & Gamble? I work 70 hours a week, man. I deserve every penny of what I've got."