The Banker on FIRE gap, from the inside

When I reviewed nine FI blogs a while back, I singled out Banker on FIRE as the only one that took variable, multi-part compensation seriously without either apologising for it or assuming everyone gets it. I work for a large financial services employer that pays exactly that way, so I've now got a few years of watching how it actually behaves, rather than reading about it secondhand. Here's the version of that piece written from inside one.

The shape of it, not the amount

Most FI writing assumes a single number: your salary, reviewed once a year, arriving in twelve equal instalments you can plan a savings rate around. Mine doesn't work like that. There's a base salary, reviewed annually and reasonably predictable. And there's a separate cash incentive — decided months after the year it's meant to reward, paid once, and explicitly conditional on still being employed on the day it lands. Hand in your notice before the payment date and the incentive you'd have gotten simply doesn't happen, whatever the year looked like.

That last detail matters more than it sounds like it should. It means the timing of a resignation isn't just an emotional decision or a notice-period logistics question — it's a financial one, with a real number attached to getting the order wrong.

Why a savings rate calculated on the total is a trap

The obvious thing to do is add base and incentive together, divide what you saved by the total, and call that your savings rate. I did this for a while. It's the wrong number, for two reasons.

First, the incentive moves. A strong year and a weak one can look completely different, and a savings rate built on the total swings with it — which makes the number nearly useless for tracking whether your actual habits are improving, since half the variance isn't behaviour at all.

Second, and worse: a savings rate that includes the incentive quietly assumes it every year going forward, which is exactly the lifestyle-inflation trap the FI community talks about constantly in the context of raises but rarely mentions in the context of bonuses. Base pay rising and spending rising to match is the well-known version. Getting used to a bonus-sized incentive and building it into baseline spending is the same mistake wearing a different name.

The fix I've settled on: calculate savings rate against base salary only. The incentive, whatever it turns out to be, gets allocated on arrival according to a split I decided on before I knew the number — investments, one-off spending, and a cash buffer — rather than a plan I make up in the moment, when the number in front of me is doing all the persuading.

The other thing nobody warns you about: timing tax

Because the incentive lands as a single payment rather than smoothed across the year, the month it arrives can look like a much higher-earning month than any other, and PAYE reacts to that in the moment rather than to your actual annual total. It usually sorts itself out by the end of the tax year, but "usually sorts itself out eventually" is a very different feeling from a payslip that's ostensibly smaller than it should be for a few months while the system catches up. It's the same mechanic behind most bonus-tax complaints you'll see online, and it's worth knowing about before the first time it happens to you, not during.

What Banker on FIRE gets right that most FI writing skips

The broader FI internet — MMM, the Escape Artist, all of it — is written for a steady-salary reader, and the advice is good advice for that reader. It just doesn't quite fit a comp structure with a second, lumpy, conditional stream sitting on top. The adjustment isn't complicated once you've named it: treat the reliable part as the number your plan is built on, treat the unreliable part as found money with its own rules, and don't let the good years quietly become the assumption behind next year's spending.

Not financial advice — I'm not qualified to give any. I've deliberately left out the specifics of my own numbers and my employer's name; the mechanics described here are common to large-employer, incentive-based pay generally, not particular to any one firm.