The fact that banks like Merrill Lynch paid out $15 billion bonuses after $42 billion losses, or that Citigroup paid out $4 billion after two multibillion-dollar rescues, have been discussed and beaten to death. 

People were outraged, politicians were in disbelief, and President Obama called it the height of irresponsibility and shameful. But the biggest surprise for me in this whole matter is finding out how stupid these erstwhile “financial masters of the universe” are with their own money. 

There are many articles about disgruntled bankers (like the ones working for Citigroup, who only got $4 billion dollars in bonuses this year) who spend way more than their salaries, and therefore are royally screwed when they find that their bonus for 2008 is nowhere near the ones in 2007. 

Weird, eh? On one hand, these Wall Street people are supposed to be a lot smarter than us financially. But talk about personal finance, and these guys are no different from Mike Tyson or Michael Jackson! I mean, honestly, I won’t be surprised to find that a lot of people are smarter financially than Mike or Michael (note to self: don’t name son Mike or Michael). But being smarter financially than a guy who makes 10 to 100 times what you make? That’s gotta make you stop and think for a while, eh? 

Do this so you can self-proclaim yourself smart

So what I, a self-proclaimed “financially smarter than Wall Street bankers” guy did with my bonus, which just came in a few days ago (in January)? Well, I (1) gave some money to my parents, (2) planned a nice dinner with my family and (3) am going for a simple holiday later this year with my family.

The rest of it (around 90% of it) will be allocated this way:

1. 25% will go into either a AUD or a GBP fixed deposit.
2. 15% will go into ready cash for investments, in case a good one comes along (been eyeing MSFT for sometime now).
3. The rest will go into strengthening my safety net. We don’t know whether we’ll still keep our jobs tomorrow these days.

I like to think that that plan of bonus usage is pretty smart (Please feel free to let me know if you have any other ideas though!)

One of my friends bought a high-end home entertainment system. One of them bought a freakin car (on credit! The bonus is used for down payment). Another planned a holiday to Japan (which is a freakin expensive country, not to mention the strength of the yen right now).

(It kinda made me wonder actually: am I the only one who’s feeling the urgency of this financial crisis?)

Later on I realized something: it’s not that they don’t feel the economic pressure. They do. But the way they experience pleasure is totally different from me. They need to spend bonuses and reward themselves to get motivated.

Whereas for me, seeing the bonus figure is all the motivation and reward I need. I don’t get any kick out of spending money–my kick is from earning and investing money. And no, I’m not saying this to boast or feel self-righteous. I’m not sure why I’m wired this way either.

Oh well. That’s probably why I liked uncle Scrooge McDuck so much as a kid :)

(Images courtesy of AMagill @ flickr and Kanou Hiroki @ flickr, in the order of appearance.)

“Some 21 percent of those with salaries of $100,000 or more say they are living paycheck to paycheck, according to a recent survey conducted by CareerBuilder.com.”

Amazing isn’t it? I still remember when I broke the S$100k p.a. for the first time. I was super ecstatic. I know, it’s in Singapore dollars, so it’s less than US$100k, but hey, S$100k is a lot of money in Singapore as well! My savings actually jumped quite significantly when it happened. No doubt that the rising prices add to the pressure and reduce the general savings rate, but one will be in red if she has nothing to save in the first place!

“The amount of money Americans save has been declining for decades. Most recently, the personal savings rate was 1.2 percent of after-tax income, according to the Bureau of Economic Analysis. A couple years ago, the rate was actually negative, meaning consumers were dipping into savings to cover expenses.”

Time to tighten the belt!

I wish I had found this site before I wrote this post and this page, which, in retrospect, aren’t really accurate. After including my mortgage, my net worth isn’t really that big actually… it’s even negative! :-S I’m gonna update the net worth page tomorrow to point to my Networth IQ page instead.

(UPDATE: Wrong. My net worth is not negative. It’s actually way positive, because I didn’t include in the calculation the house I currently live in.)

It’s really inspiring to see how people in my age group and income bracket can have such high net worth. I’m hoping to learn a thing or two from them! 

And if you’re going there, please drop by and say hi! Here’s my public profile: http://www.networthiq.com/people/5m10y