Investment banks cut bankers’ bonuses after a difficult year for the sector. According to the Wall Street Journalmajor banks’ revenues fell by more than $50 billion last year, the largest year-on-year decline ever recorded.
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%. In addition, the article warns that some investment banks may also lay off people next year.
If you live paycheck to paycheck or struggling to save money with skyrocketing bills, it can be hard to muster much sympathy for bankers dealing with pay cuts. After all, top investment bankers can take home hundreds of thousands or even millions of dollars, and that’s before we even think about their colossal bonuses.
But the broader question is whether what happens in the financial sector can also happen in other sectors. In other words, whether your job could be next. At present, the US labor market remains relatively strong, despite layoffs in the tech industry. But a few weeks ago, PepsiCo announced it would lay off hundreds of employees at its US headquarters, sparking fears that the layoffs would spread to new industries.
There is a lot of uncertainty whether we are in a recession next year, in particular whether high unemployment can be avoided. However, there is a chance that problems in the banking and technology sector are just the beginning and we could see massive layoffs in 2023. While we’re not sure, it’s worth being prepared.
Take stock of your finances, especially how much money you have in your possession bank account and what your monthly expenses look like. If you lost your job, how would you manage financially? Have you saved three to six months of living expenses in a savings account? If not, there may be steps you can take today to improve your emergency fund.
If you have high interest debt, look for ways to do it pay off. In the worst case 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 stay afloat. Paying off debt won’t happen overnight, but the more progress you can make while the job market is relatively strong, the better.
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