Money Management in Theory and Practice: Part TWO

In part one of this series on how to optimally manage money and maintain a bankroll I stated that this 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. That column included a list of questions.

In this column let’s review the questions relating to your finances and discuss why that is important.

1. What is your current net worth?
2. What is your liquid net worth?
3. What is your poker (or gambling) bankroll?
4. What percentage of your income comes from gambling?
5. What are your other sources of income?
6. How much poker income do you need to make to live comfortably?
7. What is the minimum you’d need to survive?
8. Do you have other people to support – a spouse or significant other, kids, etc.?
9. Do they contribute to the household income?

If you haven’t taken the time to answer them previously, then do it now. Some poker players have jobs, businesses, or other outside sources of income. Some do not. I am also going to divide bankrolls in three categories – small, medium and large. A small bankroll is an amount you could get in a month or less from working from your business or from your investments.

For some, people this may be a few hundred and for others a few hundred thousand. A medium bankroll should take about six months to accumulate. A large bankroll takes a least a year. If you have no outside sources of income, then either decide how many weeks it would take you to earn your present bankroll (after expenses) at whatever job you can find or just treat your bankroll as large. Losing a small bankroll is distracting, losing a medium one is disturbing, and losing a big one is disastrous.

If you are supporting other people, and thus have more expenses, be sure to include that in your calculation of the time you would be required to work to replace a bankroll you’ve lost. If you are lucky enough to have a working spouse, then you are under less pressure to maintain your lifestyle and accumulating a new bankroll should be faster.

In the next column, I am going to discuss how your personal psychology influences your bankroll management, but right now I want to discuss the biggest bankroll mistake you can make. The mistake is taking too much risk with a large bankroll, and not enough risk with a small one.

You may be wondering why you take more risk with a small bankroll. It is easier to replace a small bankroll. Also, a big percentage increase to a small bankroll has a lot of impact on your earning ability and the quality of your life. As your bankroll gets larger, going broke becomes more disastrous. Your flexibility in choosing games will increase a lot if your bankroll goes from $5,000-$10,000. If your bankroll goes from $5 to $10 million, not that much will change. On the downside, it is also much easier to rebuild a bankroll of $5,000 then it is to rebuild one of $5 million. (Yes, there are players who have built up a bankroll of five million or more, and then gone broke or even into debt.) The main takeaway from this article is: Take sensible chances with a small bankroll. Don’t risk losing a large bankroll! ♠

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.