Managing your money and investing away from the table is important. How you handle and invest your money away from the table can have a huge factor in your poker success. I am risk adverse when it comes to my bankroll. Unlike a lot of poker players I have met and gotten to know I made a decision to pay my taxes. I understand why a lot of players don’t or are hesitant to fill out that schedule C but personally I prefer to pay my taxes on my winnings.
Part of the reason I pay taxes on my earnings is that I will always rather own a property than rent one. I know a lot of people in generation Y are leaning more towards renting, but I have always felt renting was a waste of money. To put it simply, rent for 10 years at the modest rate of $1,000 a month(depending on where live) is over $120,000. I bought my condo for almost half of that, so I will continue to pass on renting.
Back to managing your bankroll, my first recommendation is you hire an accountant. My second recommendation would be to pay off all your debts which will allow you to acquire assets. I always felt weird about playing poker when I had student loans, car loans and credit card debt not tied to my bankroll. There are two exceptions to this rule:
1. Leveraging debt to aquire secondary real estate.
2. Borrowing money at very low interest rates to play poker.
The reason I leverage debt to acquire real estate is because I buy property as a true asset, not as a liability. (If you don’t know the meaning of a true asset or a liability I highly recommend you read Rich Dad Poor Dad. In short, “true assets feed you, liabilities eat you.”
When it comes to owning a property I make sure I keep between three to six months of mortgage payments on each investment. This way If I am running bad I won’t have to withdraw money from my bank roll in order to make mortgage payments. Keeping three to six months for bills is also good practice in general, whether you play poker or not.
Now borrowing money at low interest rates to play poker is a bit trickier. When I say low I mean 0%-7%. Even personal lines of credit or cash advances at 0% can come in handy if your capital is temporarily tied up. HUGE CAUTION SIGN: I only recommend these ways of acquiring capital if you have good credit, low expenses and assets you can and are willing to sell if you run into negative variance. Even with this in mind. Keep at least a $1,000 security fund and maintain a six-month emergency fund to cover personal expenses. I would also only recommend borrowing money to play if you are a winning and disciplined player proven over the course of several years.
This methodology can be a very slippery slope if you are an emotional player and can lead to addiction. In order to borrow at such low rates you must have good credit and tax history or know someone who believes in your abilities. I have been very fortunate to have both. I worked hard on my credit the last 7 years to get all my scores into the mid to upper 700’s.While this sounds like a bit of a brag, just like poker, it was not easy at all. Later on I will write an article on “OPM”, others people’s money, which will discuss creative ways to access capital. Keeping all that I have said in mind, I made the decision around November 2013 to pay off my car loan, student loans and all my credit cards.
I used money from my bankroll in order to do this and which obviously reduced my bankroll considerably. I wanted to move up my limits to $5/$10 but ultimately decided to live debt free instead. Currently the only debts I have are two mortgages. The first mortgage is for $150,000 on a property I rent out for enough to cover the mortgage along with other household expenses. The second is for my condominium in Florida, I currently owe $65,000 on this property and it is valued at around $90,000. I rent out one room whose rent covers about 95% of my living cost.
I am in the process of looking for and purchasing another property. I plan to rent out the condominium which will hopefully create a cash flow of around $400 month. I own a 2012 Sonata which I put very low miles on. I have also been able to turn this liability into an asset by renting my car out when in not using it. From the money I earned from renting my car out, I was able to purchase another car from a family member for only $2,000. What am I going to do with a second car when I’m not using it you might be wondering, well I’m going to most likely look to rent that one out as well. As we speak I have a bankroll of about $25,000, once I hit $30,000 I will be taking frequent shifts at $5/$10. If my roll drops below back $25,000 I will not risk the money playing $5-$10 and will resume at the lower levels.
I have managed to keep my total personal monthly expenses under $1000 this includes food which has allowed me to manage to keep my bankroll high. I keep all my financial accounts separate and manage them using personal capital (link affiliate): I use betterment for savings goals as well as my Roth IRA(link affiliate). Yes, even poker players need to plan for retirement. Without the luxury of working for a big company, this is very important. Although I do invest in the equities (stock) market, I am not the biggest fan of this practice.
The first reason I do not enjoy investing in the stock market is because I cannot use OPM to purchase this asset. Secondly, unlike real estate that is tangible, I see the stock market as virtual currency on a screen that I have limited management over and pretty much no control over. How you choose to handle and invest your money is up to you. I do believe in order to be happy and successful playing poker for a living while enjoying the freedom it allows you, your expenses and bad debt should be as low as possible. This will help with stress management when you experience rough patches of negative variance.
I choose real estate to invest in because I can live in a property I buy, borrow against the property or rent it out for a profit.
If you have any questions or want advice, email me at firstname.lastname@example.org Next week I will discuss poker and taxes.