Time Value of Money is the foundational concept of all undergraduate finance programs. On Day 1, professors introduce you to the time value of money concept and formula.
On the Day 2, you figure out how to use a financial calculator and never have to worry about the math again.
The HP 12c — Also a Great Star Wars Droid Name
The irony though of using time value of money for all the capital budgeting problems, discounting of cashflows, finding IRR and NPV is no one discusses the adjusted concept of money value of time.
What is your time worth to you? and what are you actually charging for it?
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How much do you pay to commute to work every month?
How much WOULD you pay to NOT commute to work every month?
How much vacation time do you leave on the table each year?
How much would you pay to take an extra vacation day?
Investment Bankers are notorious for long hours and late nights. A leaked 2021 survey from Goldman Sachs showed the culture of workaholism was alive and well despite any HR press releases suggesting work-life balance and mental health were “high priorities for our team members”
Leaked Survey Data from 2021
Now, you might say the compensation makes it all worth it. But does it? According to Wall Street Prep, most 1st year analysts in investment banking average an “all-in” comp of around $170,000 to $190,000. A great salary for sure. Especially for a 23 year old with no expenses other than themselves. But think for a minute what you’re actually charging for your time.
I’m being generous and assuming that young lad actually takes 2 weeks off through the year.
For comparison, NYC minimum wage is now $16.00 per hour and you can probably do better per hour as a plumber in North Carolina if you hustle.
I was a major fan of the Epicurean Dealmaker blog until he closed shop in 2015. Among his wisdoms and confessions during his tenure was a story someone missing their own father’s funeral because he had to get his Powerpoint presentation done in time and his reflections on the famous “rat race” sucking you in for the long haul. That 23 year old turns 25 then 30 then 35 and soon 40 is knocking on your door. Yet you are still grinding out that Manhattan rent money 95 hours a week for effectively a Plumber’s salary. No time for life experience. No time for fun. No time for reflection.
Definitely not at all an inspiration for this feed
Sure, as an investment banker you make a lot of money but I find it so ironic that many of them cannot see their own inefficient earnings they receive when they were explicitly taught to consider the time and money relationship on Day 1!
Interested in being on the Trader Dads Podcast in 2024? Shoot me an email! I’d love to have subscribers on to sit for a discussion
TRADERDADS MAILBAG
Thoughts? Questions? Comments?
Reach out! Maybe I’ll do a full post on the topic or as a Q&A
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