Money Management - Seal

We've all heard that Texas Holdem takes a minute to learn and a lifetime to master. Money management is not at all like Texas Holdem. In most cases, proper money management takes a long time and many mistakes to learn and very few people ever master it. So why this article then? Hopefully this will give the readers a basic understanding of what money management is and how to get on the right path.
Money management is a life skill. It is not something that is confined to the world of poker. In life most folks sit down and figure out what their total income is and then set up a budget of some sort to try to live within their means. For most of us, should the need arise, there are even ways to borrow extra money. The real problems occur when your expenses exceed your income on a regular basis. Like the USA these days, when money going out is greater than money coming in you get a deficit.

All poker players have similar issues to deal with. Fortunately these issues can be dealt with in stages. If you can be honest with yourself we can proceed. If you cannot be honest with yourself, then you may have bigger problems. I strongly believe that if you cannot at least be honest with yourself then you should not be gambling. It's one thing to lie to your friends about "your mad poker skillz" and the size of your bankroll. It's quite another to have to continually borrow money to stay in the game.

Stage 1 – Keep Honest Records
The first thing you have to do is start keeping private honest records of every tourney or ring game poker session you play. Make sure that every record entry contains a bottom line. If you play an $11 rebuy nlhe tourney and you rebuy 4 times and add on and then come in 54th and get a $50 payout, your bottom line is 50 – (11+(4x10)+10) or 50-61 or negative $11. One of the ways players fool themselves is by thinking that every time they cash in a tourney it is all profit. Again, these are private records and you need to be honest and careful in your math. The longer you are able to keep honest records for, the more accurate your assessment of your play can be.

Stage 2 – Assess Your Play
Leave your ego on the couch and objectively go over your records. Break them down by type of game, buy-in, and any other factor that may be relevant to your game. You may find that every time you play a tourney with a buy-in of $100 or over you lose money. You may find that overall you win money in 5% or 10% of all the tourneys you enter. But all your findings should be based solely on the numbers. The fact that you bubbled in the wsop main event three years running when your AA got cracked by 26 offsuit does not make you a terrible poker player, but it does put 30k in your loss column.

Stage 3 – Determine Why You Play Poker and If You Are Achieving Your Goal
You need to be able to honestly complete this line "I play poker because …" If your answer is "to make money", then your total bottom line had better come out positive. If your answer is "to have some fun" then you only need to make sure that you put a line item in your everyday budget for "fun" that covers your expenses, but we'll get to that. If your answer is anything but "to make money" then you must make sure that the money you spend on poker is providing you with whatever your reason for playing is. If you play to have fun and you are finding instead that you are frustrated and annoyed every time you play then you are not achieving your goal. Perhaps you need to read a few good poker books or take lessons to improve your game, or maybe you just need to take a break, but do whatever you can to get your results in line with your goals or stop playing.

Stage 4 – Figure Out Your Funding
If you are a consistent losing player who plays just for fun and you have a full time job that brings in more money than you can spend, then you are fine because your funding is from your job and you have the extra money to spend. If you are a consistent losing player who plays just for fun and you are 25, living with your parents, and need to borrow money for a good meal, then you have a serious problem because you do not have funding. This point deserves to be bold. If you are spending money on gambling that you need for any other purpose, or borrowing money to gamble with, you have a serious problem and need help. If, on the other hand, you are a casual player with a $50 a month "entertainment" budget or a professional with a 50k bankroll then read on.

Stage 5 – Find Your Correct Level of Play
Stage 5 A – Amateur players playing for fun
If you play for fun and you are a consistent losing player, first take an honest look at your income and expenses and figure out how much you can comfortably part with each month for your fun. Let's say you arrive at the figure of $100 a month. Next decide how often you want to play each month. Let's say you decide you'd like to play once a week. To find your level of play, just divide your $100 by 4 and you get $25. Regardless of short term outcome you should play in tourneys of only $25 and under buy-ins. Unless you win enough money to change your long term ( at least 1 year ) financial outlook stick to $25 and under. If, for instance, you win $12k, and do NOT need any extra money for any other reason in your life, then your long term outlook has changed and you now can comfortably spend $1000 a month on poker for a year. But unless you win a minimum of 100 times your monthly "allowance" for poker do not change your level of play.

Stage 5 B – Amatuer players playing to win money
I place myself in this category. If you have a job that pays all your bills and more and find that over as long a run as possible you are a consistent winner at poker, then you are in this category as well. First you need to start keeping a separate bankroll for your poker play from your other accounts and get an exact total on how much this is. Let's say you've managed to build up a bankroll of $10k. Next you need to decide how much time you can comfortably spend playing poker each week. Let's say you decide you can play 5 nights a week. Then do the math. 5 nights a week times 50 weeks a year (please do take a vacation now and then) = 250 poker sessions a year. 250 goes into 10,000 40 times so you can spend $40 a night on poker. If you'd like to play in a bigger event you have a few options – you can play a sat that fits into your budget, you can play smaller or not at all for a few nights until you have set aside the buy-in, or you can set aside a specific tourney as your personal "satellite" and use any winnings from that game only as a buy-in for the bigger event. But you cannot ignore the facts and tell yourself that your good play will offset your lack of funds. Once you figure out your budget you must stick to it. This is the essence of good money management.

Stage 5 C – Professional Players playing to win money
If you have no job outside of poker to pay your bills and find that over the long run you are a consistent winner then you are in this category. You are basically in the same situation as 5B, but with a very important difference – you do not have a separate bankroll from the rest of your money. All your monthly expenses need to come out of your poker money. Before you can even figure out your play level you need to make sure you can set aside at least 6 months of living expenses and keep them separate from your playing bankroll. If you cannot do this please get a job outside of poker. All the best players in the world have had extended losing sessions that can go on for months. If you can do this, then make sure you have enough of a bankroll left to allow you to play high enough to earn your expense money for the month and still grow your bankroll. Math experts with higher degrees than mine have posited this is at least in the 6 figure range.

Now comes the math part. The math differs depending on whether you are a cash game player or a tournament specialist. Cash games can be very dangerous to an undisciplined player. The biggest danger is that you can always buy into a cash game for any amount you choose, and if you lose your buy-in you can always reload with any amount you choose. It is theoretically possible to lose your entire bankroll in a single session. To guard against this catastrophe you absolutely must become disciplined enough to stick to a formula regardless of short term results.
First of all NEVER risk more than 5% of your bankroll in any one game regardless of the "juiciness" of the situation. Sure, in the long run you are going to win a lot of money from the fish in the 50-100 blind nlhe game, but in the short run of one session a bad run of luck can wipe you out. Once you are out of action, the game is over for you and there is no more long term. You are done.

Second of all, decide just how much money you need to win each day on average to both pay for your expenses and grow your bankroll. For example, if your monthly expenses are $3000 and you play 300 hours a month, then just to make your expenses you need to win $10 an hour. If you add in another $10 an hour to grow your bankroll, then you need to make $20 an hour. Experts agree that most pros can comfortably average between 1 and 2 big bets an hour profit, so you should play at either a 10-20 or 15-30 limit game to reach your goals. To comfortably play in either of these games you need a bankroll that can withstand the short term swings. A good rule of thumb is to have at least 1000 times the big blind in your bankroll and more like 2000 times it to be safe.

For tournament specialists the swings are much more dramatic. Eric Seidel said it best when he said "I go to work 100 days and 99 of them I come home with nothing." It's bad enough not to get paid for all that work, but it's even worse to have to pay for the privilege of working. I firmly believe that perhaps the hardest way to make a living playing poker is to only play MTTs. My personal advice to you is to mix in some SNGs and if you are good enough in those then to play them every day to supplement your income. If you are determined to only play MTTs you need even more money set aside to cover your living expenses than a cash game pro. I would suggest having a full year's expenses set aside and still having a larger bankroll to start, perhaps even 1000 times the buy in of your average tournament. 

Stage 6 – Avoid the Mistakes
Whether your optimum level of play is freerolls and $1 MTTs or 50/100 NLHE, there are always many ways to mess yourself up. Every time before you play you should ask yourself "Why am I playing?" If the answer to this question is not the same as usual, take a step back and count to ten. We have all felt the need to blow off some steam, especially after a difficult loss or bad beat. Fine, blow off some steam, but do it in a freeroll or at least in a tourney that is one tenth of your usual buy-in. Perhaps putting $2 into a penny game will do it. Just make sure you do not allow yourself to spend ANY more than that. Better yet, go out and get some ice cream or maybe a beer (please stay away from a beer float – you will regret the combo in the morning).
On the flip side, if you are running great allow yourself the opportunity to exploit your good fortune. If you can do it just once and not make it a habit, take a little of your profit and play one time in a bigger game. Just make sure you are only using profit and that win or lose you then go back to only playing in your optimum level of play.