Money Management in Theory and Practice: Part I

Mason Malmuth once referred to the topic of money management as extremely silly. From a theoretical point of view, this may be true. In general, if you don’t have an advantage you shouldn’t play, and if you do, no system of money management will convert you into a winner. From a practical point of view, you still need to have some idea of how to manage your bankroll when you do have an advantage or at least frequently have an advantage.

The WSOP has just ended. During the six weeks it lasted there were a huge number of tournaments at the Rio and elsewhere. There were non-stop cash games, some of which were great. Both tournaments and cash games could be found with buy-ins ranging from miniscule to the nosebleed high-roller events. Congratulations to the tournament winners, especially to those I consider friends like Justin Bonomo, John Hennigan, Phil Hellmuth, Michael Mizrachi and Shaun Deeb. I’m sure there were also a lot of huge cash game winners.

On the other side of the ledger there were also a lot of losers, some small and some big. Over the last two weeks or so of the series, a handful of people approached me about borrowing money or being financed in tournaments. These people probably needed lessons in money management or poker technique or both. Optimally managing money and maintaining a bankroll is not a one-size-fits-all endeavor. It varies from individual to individual depending on factors relating to finances, psychology, skill level, and personal situation. Here is a list of questions you should answer before deciding what is right for you.

1. What is your current net worth?
2. What is your liquid net worth?
3. What is your poker (or gambling) bankroll?
4. How would you describe yourself as a player? a) Long-time, full-time professional, b) Recently embarked on pro career, c) Another job but my poker winnings supplement my income, d) I play for pleasure and think I’m a small winner?
5. What is your skill level? a) expert, b) strong player, c) small winner, but studying to improve, d) I can play well when I focus, but other factors like tilt or alcohol sometimes get in my way.
6. What percentage of your income comes from gambling?
7. What are your other sources of income?
8. How much poker income do you need to make to live comfortably?
9. What is the minimum you’d need to survive?
10. Do you have other people to support – a spouse or significant other, kids, etc.?
11. Do they contribute to the household income?
12. How would you class yourself psychologically (calm, excitable, a steamer subject to tilt)?
13. Are you risk averse or do you like to take chances?
14. If you went broke (or nearly broke,) would you be devasted or would you shrug, accept that it happens and quickly start rebuilding your bankroll?
15. Have you gone broke in the recent past, and if so what would you say were the causes?

In some ways it would be better if this was a book and not a magazine article. Then you could answer the questions, then proceed to the next chapter. In this case, you’ll have more time to think about your answers (and why they matter,) but you won’t get the immediate feedback. In the next column I’ll try to repeat the questions, and then give you some suggestions based on your answers. ♠

Steve ‘Zee’ Zolotow, aka The Bald Eagle, is a successful gamesplayer. He has been a full-time gambler for over 35 years. With two WSOP bracelets and few million in tournament cashes, he is easing into retirement. He currently devotes most of his time to poker. He can be found at some major tournaments and playing in cash games in Vegas. When escaping from poker, he hangs out in his bars on Avenue A in New York City -The Library near Houston and Doc Holliday’s on 9th St. are his favorites.