Money Management Explained
One of the most important aspects of ensuring you have a profitable, safe
gambling experience is by paying careful attention to money management.
"Money management" is keeping a close watch on how much money you
spend on gambling. Most of those who run into trouble with gambling usually do
so because they do not keep track of their spending, and they do not understand
some of the basic principles behind gambling.
The "House Edge" – You're Not Being Cheated
It is a commonly held belief that casinos, especially those which operate
online, rig games in such a way to ensure that they will unfairly win most of
the time. This phenomenon is commonly known as the "house edge." When
gamblers lose, sometimes they feel they've been cheated by the house and
therefore try to think of way to "get their money back."
However, this is not the case. Virtually every casino game has a built-in
profit in every bet. Every bet you make has a probability of winning or losing.
If you were to bet on a coin toss, the probability would be 50-50. If you bet $1
and were paid a $1, you would be betting "even money" and would be
paid "true odds." If the house paid you $.95, the house would make a
5% profit on the winning bet. The percentage – a variation from the true odds
– is the real "house edge."
Game such as roulette, craps, and big six usually have fixed odds and
therefore a fixed edge. In roulette, for example, there are a total of 38
numbers and 12 numbers of the dice. No matter what the outcome of a particular
roll, future rolls will have the same probability.
Blackjack is in a different category because every time a card comes out of
the shoe, the makeup of the cards remaining changes. Depending on which cards
have been played and the skill of the player, the advantage can shift from house
to player in the blink of an eye. Games such as poker also tend to be more
skill-based and do not rely on a fixed house edge.
The "house edge" allows casinos to profit whether you win or lose.
Games such as blackjack tend to have high stakes because the edge is not fixed.
While the payoffs are high, so are the losses, and these games require an
enormous amount of skill. If you want to play this type of game, develop the
skills and learn a strategy. Remember to stick with that strategy no matter what
the outcome. Remember that the house is not out to cheat you – casinos make
their money by relying on the behavior of bad gamblers.
Knowing how the house edge works and how to play the games is only half the
story. Your gambling experience will be stressful and perhaps even traumatic if
you do not have a reasonable strategy for controlling your spending while using
the online casino.
We've all heard of stories about the unlucky gambler. Perhaps you've even
seen him or her at your local casino. He's playing the slots, or maybe poker
or blackjack. After peaking early, he's lost several hundred dollars. The more
he plays, the more he loses, and the more he plays, the more he thinks he's
"due for" a big win. So he keeps increasing his bets, hoping to make
up for earlier losses. Before long, he's broke and wondering what happened.
This phenomenon is called "chasing" or "scared money" and is
the cardinal sin of gambling. While this situation is regrettable, it could've
been avoided with a little planning and discipline.
Step One: Set Your Bankroll
In gambling, your "bankroll" is the amount you have set aside for
wagers. Sports gamblers set aside a certain amount of money to be used in
gaming, and other types of gamblers should do the same. You need to choose your
bankroll before you start gambling and never deviate from it.
Follow these common sense guidelines when setting your bankroll:
- Never bet the rent money. This should be obvious. Consider your
current lifestyle and how much it costs. This includes things like paying
rent, buying groceries, putting the kids through school, and other expenses.
Limit your bankroll so that, if you were to lose it all, your lifestyle
would not be affected. Casino games tend to have what is called a negative
expectation, which means that over time, your bankroll will gradually
- Don't consider gambling to be an investment. Don't set aside a
bankroll thinking that you can double it and burn your mortgage. That's
not how it works. If you're looking to invest, you're honestly better
off investing in mutual funds or even day trading. Remember that gambling is
a game; you're doing it to have fun, not to strike it rich. Sure,
you might get lucky – that's part of the fun – but don't expect
- Don't use borrowed money. We've all seen the chronic gambler
character in movies – he's so addicted to gambling that he takes out
loans, visits loansharks, and gets into big trouble. Don't be this
character. Your bankroll should come only from your disposable income –
gambling is, after all, entertainment. If your bankroll becomes depleted,
stop playing. Perhaps you can save up money and create a new bankroll at a
later date. It takes discipline, but watching your money is an absolute
necessity if you want to stay out of trouble. Many of you will be using
credit cards. If so, use this rule of thumb: ask yourself if, your entire
bankroll was on your card and you had to pay the card off in full today,
would you be able to pay it? If not, then lower your bankroll accordingly.
Step Two: Manage Your Units
In sports gambling, estimated scores are rated by a star system. Each star
represents half a unit, so two stars would equal one unit. A unit is usually a
percentage of a player's bankroll, usually around 5-10% but never higher.
Sports gamblers use two systems to control how much they wager – one system
sets the unit at a fixed percentage and calculates the bankroll on a daily
basis, the other adjusts the unit up or down when the player has either won or
lost past a certain percentage.
The goal of the unit system is to limit losses while losing and become more
aggressive when winning. It works for sports gamblers, and it works for online
casinos as well. You'll find you're much better off by coming up with a
gameplan before instead of making one up in the heat of gambling, when emotions
are running high. By following these guidelines, you can use a similar system:
- Vary the amount you bet with a fixed formula. This is a great way to
avoid chasing. Know that winning and losing streaks are part of the game,
and during winning streaks, increase your bets in a manner that suits your
style. A good baeline to use is a 50% progression or a 1, 2, 3, 4
progression. For a 50% progression, you would increase your bet by 50% after
winning a bet. The progression for a $5 bet would look like this:
$5-$8-$12-$18-$27, etc. You would keeping increasing your bet until you
lose, then you would start again at $5. For a 1,2,3,5 progression, you
increase your bet from 1 unit to 3 until you reach the maximum of 5. For
both of these progressions, you would use a maximum of $100 units;
therefore, if your minimum bets was $5, you would need a $500 playing
bankroll. This method is more conservative than the 50% progression.
- Don't use your bankroll all in one session. To maximize your
banroll's longevity, set aside a certain amount to be used in each gaming
session. For example you may decided on the weekend that you'll use enough
for 2 or 3 playing sessions, which would be around 40 or 60 units. You would
use 10 units per playing session and stop if you lost the units for that
session or won 10 units.
- Don't quit during winning streaks, but do know when to stop. Don't
quit during a winning streak. If you manage to win 10 units, see if you can
win another 10 units. However, when the tide turns and you start to lose –
and remember, the laws of probability dictate that it'll happen eventually
– quit the session with your profit. It's OK to increase your bet size
when you're winning, but never do so when you're losing. When you
do start to lose, pull out with your profits. If you must keep playing,
reduce your bet size until you reach another winning streak. Remember that a
small profit is better than a huge loss!
- Pace yourself. When playing games such as craps, you can pace
yourself by determining beforehand how much you can afford to lose
relative to how long you want to play. Let's say, for example, you have a
session buy-in of $300 and you want to play an hour. If you bet $50 pass
line with double odds ($100) you will spend $150 per bet, and you money may
be depleted in just a few minutes. On the other hand, if you bring $900 to
the table and decide to play $300 per session, you can bet $5 pass line with
double odds ($10), and your bet total is only $15. Your buy-in will last
significantly longer, and this extra time will allow you to look for a
streak of multiple passes, so you can increase your bets while you're
winning and decrease them while you're losing. This sensible approach will
lengthen your time at the table, and since the casino has a built-in edge on
games like craps, the best way to be profitable is to remain at the table as
long as possible in order to hit a winning streak.
Know How Much Your Credit Card is Costing You
It's no secret that Americans have a huge debt problem. Part of the problem
is credit cards, many of which promise the luxury of play-now pay-later
convenience in exchange for interest rates of 19.9% or even higher. Since many
online gamblers use credit cards to develop their bankroll, you need to know how
much they're charging you. When you have an outstanding balance on your cards
and make only the minimum monthly payment, the interest charges will kill you.
Consider the following example of a $537 balance repaid with the minimum payment
at 20% interest:
$537 Repaid at 20%
If you choose to pay it off over 5 years, you'll pay an additional $250,
close to %50 of the original balance! And even if you pay it off in a year, you'll
still pay an additional $60 in interest. And don't you dare forget to make a
couple of payments, either. Most credit card companies have a rule where if you
miss two or more payments within a six month period, they increase your interest
rate substantially. In this case, the percent of interest would likely be
increased to around 25%, which would bump the 5 year total to around $900.
Discipline – The Key to it All
By now you've probably realized the key to it all is to develop a plan and
maintain the willpower to not deviate from it. Indeed, discipline is what
seperates the winners from the losers. Make no mistake about it – gambling can
get intense. Whether you're winning or losing, emotions can run high, your
fragile male ego can become bruised, and you may find your self losing control.
At the point, gambling is no longer fun; and if it's not fun, why do it?
We've all seen the professional gambler, or perhaps the skilled poker
player in old westerns. Whether he has a full house or the worst hand he's
ever been dealt, he betrays no emotion. Always cool, calm, and aloof, he knows,
as the Kenny Rogers song goes, "when to hold 'em, when to fold 'em, and
when to run."
While you don't have to be as dour as the professional gambler, you should
be just as logical when it comes to handling your money. Be honest with yourself
and set limits. Stick to those limits. That way, when you won't have to worry
about how much you're winning or losing or whether you'll be able to win
back enough to cover the rent this month. Set your boundaries before you start
the game, and you can just relax and have fun. That's what gambling is all
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