Our Goal in this section is to open your eyes to the concept of having a precise plan of what to do with your money that will best allow you to avoid a few common mishaps that regularly happen to poker players of all skill levels. In order to get there, we will establish a few key concepts that all poker players need to constantly be aware of in order to have the right mindset while playing poker. Then we will explain why poker is gambling to some and why it is a game of skill to others and tie these concepts together to show how having a good money management system is required in order to make poker a game of skill for you.
A fundamental step in a successful, long-term, money management plan is honesty. That means honesty about every penny that ever comes from your pocket and ends up on a poker table, and exactly what happens to it, including if and how you won or lost.Amazingly, as simple as this concept sounds, the following is still a fact. YOU ARE IN DENIAL! Don't worry, so are we. It is just so easy to lie about skill level, money won or lost, bad luck, etc. In fact, the majority of poker players lie to themselves about how good they are. It is not uncommon for half the players at a poker table to think that they are the best player at that table, which obviously isn't possible. The truth is that most players are far worse than they think they are, and it's likely that YOU fall into that category as well. We sure did before this was pointed out to us. Once you realize this, though, you can start to GET OVER IT. And, even if you actually are the best player at the table, it is still best to think about how you can improve your own game. Focus on playing the best poker you can play as often as you can, and don't worry about how much you win or lose in one session. Don't brag to your friends when you have a good day, and more importantly, don't get mad at a bad player when you get sucked out on the river. Once you start viewing poker only in the long term, you'll see that these bad players are your best customers, and even though you suffered a bad beat today, in the long run you'll make money in that same situation.
Try to hammer this thought into your head: Any time you make a mistake, you lose money in the long run, even if you may have actually won some money once from that mistake. Start viewing winning poker as a long string of correct decisions, and the money will come on its own.
Now that our main goal is to play winning poker rather than to make some money by gambling, the saying "Don't bet the house" becomes very important. Obviously, you shouldn't play with money that you cannot afford to lose, simply because you don't want to be put into life-compromising situations. But there is another reason to not play with money that you can't afford to lose, and it is this: You will not play your best if you are worried about losing the money in front of you. A money management plan ensures that you will only be playing the limits that your bankroll allows for, and, if you trust your plan, you can play your best, worry-free game. Sections 3 and 4 help explain this further.
One mistake that people regularly make is sitting down at a table without enough money ON THE TABLE. For example, if you sit at a $100 max buy-in, no-limit table with $50, you are putting yourself at a significant disadvantage in a couple of ways. The first disadvantage is that you are not allowing yourself the opportunity to bluff. Having more chips in a no-limit game and knowing how to push people around is one of the most effective ways of adding to your stack at a poker table. The second disadvantage is that you aren't allowing yourself to win as much money when you have the best hand. Many people who don't understand these concepts will often sit down at a no-limit table without enough money in front of them. Maybe they figure that for the same $100 that they could sit down with all at once, they can instead have two chances to make money. Maybe they just don't want to jeopardize $100 on one hand. Either way, they are making it significantly more difficult for themselves.
The same problem occurs all the time at limit tables. Any time that you don't have enough money on the table to be able to play a hand all the way to the end, you should not be playing at that table. If you are all in before the river in a limit game, you are costing yourself money you could be winning.
Another common mistake involves the size of your bankroll. Since poker is short-term gambling, it is very important to have a bankroll large enough to survive the possible swings that short-term gambling can incur. To help explain this further, let's use no-limit $100 max buy-in with blinds of $1 and $2 as an example. We advise you to buy in for the maximum $100 at this table. Again, having more money in a no-limit game is always an advantage. However, if you come to a casino with only $100 and then sit at a table with ALL of your money, you WILL NOT be able to play to your optimal ability. Your small bankroll will prevent you from making certain correct calls. For example, say you have $100 in front of you to begin a hand and have put $10 in preflop with 6,7 suited. There are 4 other players in as well. The flop is A,5,8 of all different suits. If 3 of your opponents go all in for more than $90 before it's even your turn, it is correct to call, no matter what. However, in this case you might be afraid to make this call, despite its positive expected value, because you will only win the hand about one third of the time, and you will be headed home the rest of the time. You must have enough money in your pocket to account for such fluctuations.
Our recommendation for no-limit is to always buy in for the maximum when there is a maximum and to have at least 5 times the maximum buy-in with you to account for the fluctuations of individual poker sessions. We recommend not EVER playing in a no-limit game without at least this amount of money. We are also assuming that if you are going to be playing in an unlimited buy-in, no-limit game that you are VERY familiar with no-limit strategy and can essentially fend for yourself. This is because, while these general principles still apply, there are other factors that make unlimited buy-in games case-by-case situations.
Our recommendation for limit is to have a poker bankroll of at least 100 times the big bet. Some professional poker players recommend having 200 times the big bet. We feel 100 times the big bet is sufficient because of our step plan, explained below. Out of this bankroll, we recommend bringing at least 30 times the big bet to the table. And remember, if you ever get to the point where you don't have enough money to see a hand all the way to the end, then you need to either buy in for more, or stop playing. It's been said by some professionals that the most you should allow yourself to lose in one poker session is 30 big bets, a theory that has to do with the psychology of losing money. While we respect this concept, we still believe that as long as you are playing quality poker, and the table is still worth sitting at, then play on.
In both no-limit and limit games, we recommend to treat each session only in terms of the session itself. In other words, stay at a game as long as the game is good for you. DON'T let your bankroll tell you when you stay or leave. ONLY leave a table if the game becomes unfavorable to you. For example, leave if you think the players at the table are better than you, if you're too tired to be playing, if you start feeling sick, if you feel yourself beginning to tilt, or something else of that nature. The point here is that if you are already sitting at the right game, whether you are winning or losing should not make a difference. In addition, if you end a session with less than the amount we recommend having in your bankroll for that limit, you should play at a limit that your bankroll can appropriately cover the next time you play or wait until you have enough money to comfortably sit at the limit you were just at.
If you plan on playing tournaments, we advise you to choose an amount of money as a buffer for your bankroll and then to choose a single table tournament buy-in as your base. For example, you might choose $100 as your buffer and $10 single-table tournaments are your base buy-in. So now, if you are ever at or below $100 for your total poker bankroll, then you ONLY ALLOW YOURSELF to play $10 or less buy-in SINGLE TABLE TOURNAMENTS. If your bankroll is above $100, then you can play any tournament you want of any buy in at all, unless buying into that tournament will bring you below your buffer (which again in this example is $100). What this means is that even if you have only $200 as your bankroll, it is STILL OK to play in a $100 buy-in multi-table tournament. One reason is that as long as you cash out according to your plan when you place in the money, you will always have something to show for your efforts. Another reason is that your cash-out plan will require you to have cashed out some money in the process of getting to $200 in the first place. We explain both of these concepts later on in our cash-out plan section. Also, you may decide to raise your buffer after a time. As your poker skill progresses and your bankroll increases, you can choose a higher tournament buy-in as your base. This way, you can give your poker bankroll a chance to increase at a faster rate. If you find that your poker bankroll becomes depleted, then you probably increased your buffer before you were ready.
We still haven't actually defined what we consider to be a money management plan. Before we finally get to that though, understand what we have just done in the sections above. We have given you the information necessary to really think about poker as one long-term session. The missing ingredients here are a system for building up a bankroll, and a system for cashing out. Having both of these planned out is an essential final step in the transformation from gambler to poker player.
We have already established the recommended bankroll sizes for your various limits of play. We have also talked about the proper mindset for playing quality poker. We now need to talk about where your bankroll is going to come from. We recommend coming up with a system that fits your lifestyle. For example, if you are someone who does not have much money put away and you don't feel comfortable spending freely, then we recommend assigning a rather small percentage of your EXCESS INCOME (excluding money for rent, food, etc.), maybe 5%, to put aside into a poker bankroll. We also recommend never straying from this plan under any circumstances. We understand that sometimes a re-assessment of your personal money management plan is necessary, but the discipline to actually stick with your plan will ensure that you never lose more money than you can afford to cope with. This type of a plan will also benefit you if you do have a lot of money set aside that you can afford to lose. The reason is that if you limit yourself to a small percentage of your income, then you will never allow frustration to force you to keep tapping into your savings. Also, to get you started, we recommend spotting yourself an amount of money appropriate to your lifestyle. We have provided the following example to help give you a clearer idea of what we mean.
| Income per month after taxes | Known expenses per month (estimated where necessary) | Savings (Income per month minus known expenses per month) | Maximum percentage of savings per month that goes toward poker bankroll | Maximum amount of savings per month that goes into poker bankroll | Amount of money put into poker bankroll to start (one time only) |
| $4000 |
|
$4000-$2800 = $1200 | 15% (85% remains as savings) | 15% of $1200 = $180($1020 remains as savings) | $500 |
In the example above, the person in question has an income of $4000 a month. They have clearly defined their expenses, and in so doing, they have made sure that their poker bankroll is coming from their excess savings and is an amount of money that will be relatively insignificant to their lifestyle if lost. In the example, 15% of their estimated savings is put into a poker bankroll each month. In our opinion, anything up to about 30% or so would be reasonable. We feel that anything more could cause you to feel the loss too much. This is because the psychology of losing a large percentage of savings can cause a person to feel like they have to make their money back. Any time you have this mindset of getting back to even, your poker will be negatively affected. Remember, the key to having a money management plan is to minimize the negative effects of losing money. After all, as discussed above, you can't play your best poker if you are afraid to lose the money you're playing with OR if you are trying to win back money that you have just lost.
Only an estimated 15%-20% of all poker players actually make money in the long run. We hope that you are in this winning percentage, but this money management plan will make sure that if you are in the other 80%, you aren't putting yourself at risk. Just being aware of this will also help you be honest with yourself if you do lose money. If you still need to polish off your poker game, then this type of a plan will allow you to spend money learning how to play better while not negatively affecting your lifestyle. Also worthy of note, if you happen to be in college and therefore have no income or are in some other non-income phase of life, then this plan for building up a bankroll cannot apply to you. Instead, you really need to allot yourself a set amount of money one time that you can afford to lose, and accept that if you lose it, you will not play any more poker until you start to have some form of an income.
Money management is incomplete, however, without a cash-out plan. A cash-out plan is important because it allows you to make sure that you get something out of your winning sessions. Especially in online poker, it is all too easy to just keep playing with the money you make, building it up more and more, and then playing higher and higher limits until you finally go on tilt and lose everything or come across a game that you're just not experienced enough for. In that case, you will never really have a chance of making any money at all. Here are the concepts that you need to remember when thinking of a good cash-out plan:
First, you must make sure that you give your poker bankroll a chance to grow. There is no sense in cashing out ALL of the money you make. If you were to do that, then you could eventually run into a really tough session that completely depletes your poker bankroll. Also, if your poker bankroll isn't growing, then you aren't allowing yourself to play in higher limits.
Second, a cash-out plan will force you to cash out money that you can spend on anything you want (BUT NOT MORE POKER!). This money will justify your playing poker, hopefully taking away the feeling of loss during those times when your bankroll takes some harder hits.
Third, you need to come up with a cash-out system that really works toward your personal goals. For example, if your goal is to get to higher limits as fast as possible, then maybe you should only cash out 20% of your winnings. If your goal is to have more money faster and you are only interested in playing at the limit you currently play at, then maybe cashing out 75% of your winnings is the way to go. Think about your personal goals and then decide what percentage works best for you.
Fourth (cash games only), your cash-out plan should be divided into STEPS. The first step acts as a buffer, equaling the minimum bankroll required to play at your lowest intended limit (i.e. if you intend on playing $1/$2 limit, the first step will equal $200, which is 100 times the big bet). If your bankroll falls below your first step at the end of any session, then you need to wait until your income plan brings you back above your first step before you can play again. Each step above this is equal to the previous step plus the minimum bankroll required to play at the next limit (i.e. the second step, for $2/$4 limit, will equal $600, giving you a full bankroll to play at $2/$4 limit, plus a full bankroll to play at $1/$2 limit if you lose your $2/$4 money ).
To explain the final concept, we will use an example. Say that your first and second steps are $125 and $375, for no-limit $25 max buy-in cash games and no-limit $50 max buy-in cash games, respectively. You begin with a bankroll of $125. Your plan is to cash out 50% of all your profits. In your first poker session, you make an amazing $500 profit. This means you will cash out $250, bringing your bankroll to $375, enough money to play at the next step. The next time you play poker you lose $250, bringing your bankroll back down to $125. At this point, you may feel as if you need to make back that $250 before you can cash out again. We advise not considering yourself as having lost money though. Instead, we recommend using your steps as start over points. In this case, falling back down to $125 means that you should start over and now cash out 50% of the next profit you make.
There was one comment we made earlier about tournament play that needs elaboration. We said that it is OK to play in a $100 buy-in tournament as long as it doesn't bring you below your buffer (again, in the example, we said $100 was the buffer). This means that if you have a bankroll of $200 or more, then it is ok for you to play in a $100 buy-in tournament. The concept here is that if you start with $100, then by the time your bankroll is up to $200, you are going to have already cashed out some money, probably somewhere between $50 and $100. Now, the idea here is that you can afford to lose any amount of money that will result in your having over $100 in your bankroll because if you fall back to $100, then, first of all, you are going to start over with your cash-out plan and not need to make back the $200 before you start cashing out again, and in addition, you will now only be playing $10 or less single table tournaments, which will eliminate your risk of going broke. So again, if you were to have a $200 bankroll and play in a $100 tournament, since you will cash out your winnings according to your plan, as long as you have a positive expected value in that tournament, it is still logical to play in it if you want.
Three more things to keep in mind:
Take some time to think about how these concepts will affect your cash-out plan.
To recap, the following things are all essential in a good money management plan:
The concepts we have described in our money management section are here to help you deal with some common problems that you will face as a poker player. However, a good money management plan is no substitute for solid poker strategy. The foundation for any successful poker player is an understanding of the math and psychology of poker, combined with table experience. Money management only builds upon that foundation.
We hope that in reading this, you have kept in mind that money management theory is controversial by nature. While we may express a lot of our thoughts and ideas as concrete advice, we understand that each person's individual situation has a lot to do with what works best for them. Because of this, we do not expect our plan to be right for everyone. However, we do feel that all of the concepts we talk about should be seriously considered by all poker players.
Our goal is always to help our readers. If you are having trouble coming up with a money management plan that is appropriate to your lifestyle, please email us at support at chainpoker dot com, and we will do the best we can to help you personally. Also, please email us with any comments or criticisms you might have. We strongly appreciate all feedback.