Wall Street Bankers Gear Up for Pay Cuts. Should You?

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What happenedInvestment banks are cutting banker bonuses after what was a rough year for the industry. According to the Wall Street Journal, big bank revenues fell by over $50 billion last year, the largest year-over-year decline on record.As a result, top firms such as JPMorgan Chase, Bank of America, Citigroup, Jefferies Financial, and Goldman Sachs will all cut annual bonus payments by as much as 45%. Moreover, the article warns some investment banks may also lay people off next year.So whatIf you’re living paycheck to paycheck or struggling to save money in the face of skyrocketing bills, it may be hard to muster much sympathy for bankers facing pay cuts. After all, top investment bankers can take home hundreds of thousands or even millions of dollars a year, and that’s before we even consider their whopping bonuses.But the wider question is whether what’s happening in the financial sector could play out in other industries. In other words, whether your job could be next. Right now, the U.S job market remains relatively strong in spite of layoffs in the tech industry. But a few weeks ago PepsiCo announced it would lay off hundreds of workers at its U.S. headquarters, prompting fears that layoffs are spreading to new sectors.Now whatThere’s a lot of uncertainty about whether we’ll enter a recession next year, particularly whether high unemployment can be avoided. However, there’s a chance that issues in the banking and tech sectors are only the start and we could see widespread layoffs in 2023. Although we don’t know for sure, it is worth being prepared.Take stock of your finances, particularly how much money you have in your bank account and what your monthly outgoings look like. If you were to lose your job, how would you cope financially? Do you have three to six months’ worth of living expenses socked away in a savings account? If not, perhaps there are steps you can take today to build up your emergency fund.If you’re carrying high interest debt, look for ways to pay it off. In the worst case scenario that your income drops or you lose your job, those debt payments can take a big bite out of your budget and make it harder to keep your head above water. Debt paydown won’t happen overnight, but the more progress you can make while the job market is relatively strong, the better.Alert: highest cash back card we’ve seen now has 0% intro APR until 2024If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes. Read our free reviewWe’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Goldman Sachs Group, and JPMorgan Chase. The Motley Fool has a disclosure policy. 

What happened

Investment banks are cutting banker bonuses after what was a rough year for the industry. According to the Wall Street Journal, big bank revenues fell by over $50 billion last year, the largest year-over-year decline on record.

As a result, top firms such as JPMorgan Chase, Bank of America, Citigroup, Jefferies Financial, and Goldman Sachs will all cut annual bonus payments by as much as 45%. Moreover, the article warns some investment banks may also lay people off next year.

So what

If you’re living paycheck to paycheck or struggling to save money in the face of skyrocketing bills, it may be hard to muster much sympathy for bankers facing pay cuts. After all, top investment bankers can take home hundreds of thousands or even millions of dollars a year, and that’s before we even consider their whopping bonuses.

But the wider question is whether what’s happening in the financial sector could play out in other industries. In other words, whether your job could be next. Right now, the U.S job market remains relatively strong in spite of layoffs in the tech industry. But a few weeks ago PepsiCo announced it would lay off hundreds of workers at its U.S. headquarters, prompting fears that layoffs are spreading to new sectors.

Now what

There’s a lot of uncertainty about whether we’ll enter a recession next year, particularly whether high unemployment can be avoided. However, there’s a chance that issues in the banking and tech sectors are only the start and we could see widespread layoffs in 2023. Although we don’t know for sure, it is worth being prepared.

Take stock of your finances, particularly how much money you have in your bank account and what your monthly outgoings look like. If you were to lose your job, how would you cope financially? Do you have three to six months’ worth of living expenses socked away in a savings account? If not, perhaps there are steps you can take today to build up your emergency fund.

If you’re carrying high interest debt, look for ways to pay it off. In the worst case scenario that your income drops or you lose your job, those debt payments can take a big bite out of your budget and make it harder to keep your head above water. Debt paydown won’t happen overnight, but the more progress you can make while the job market is relatively strong, the better.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Goldman Sachs Group, and JPMorgan Chase. The Motley Fool has a disclosure policy.

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