Money Management for Winners
Fear and greed.
These are two emotions that motivate all human beings but particularly affect gamblers—and both, when not kept in check, help pave the way to wrack and ruin. Scared money is dead money, but overplaying one’s hand by being too aggressive is just as bad.
These emotions manifest themselves in every skilled gambling endeavor, whether you’re playing the horses, sitting at the poker table or betting sports. If you don’t bet enough—or if you’re terrified of losing—you’re not betting efficiently or confidently, and you will lose. If you bet too much when the situation doesn’t properly warrant it (i.e., when the odds aren’t really in your favor), you’re on a slippery slope. You might get lucky, but in the long run, you will erode your bankroll.
This is why effective money management is crucial to long-term success. If you want to conquer the gambling world, you need to have the proper money-management skills that will help you not only manage and protect your bankroll but also help it grow year in and year out.
So what exactly is money management?
Let’s start off with a quote from Six Secrets of Successful Bettors, which has an entire chapter devoted to money management: “…good money management is more than just managing your money effectively, in strict accounting terms. It’s about building your bankroll, betting wisely, taking advantage of overlays and not betting underlays (i.e., isolating value), and maximizing your edge. It’s about managing your bankroll so it can grow.”
So here are the “Five Keys to Successful Money Management”:
- Maintain a level of equanimity.
- Remember that it’s one long game.
- Maximize your bets when the odds are in your favor.
- Keep detailed records.
- Stick to what you’re good at.
MAINTAIN A LEVEL OF EQUANIMITY
Gambling is a roller-coaster ride. There are highs and lows, peaks and valleys, good days and bad. The winning player is able to maintain an even keel, no matter the result. It’s easy to get loose and aggressive while riding a winning-streak high, and it’s just as easy to sink into a pit of despair when a couple of bad beats cast a dark cloud on your play.
So how do you maintain a level of equanimity when money is on the line?
- Never bet more than you can lose: you need to set a real budget for yourself (whether it’s yearly, monthly, or daily) and stick to it. Your play should be a percentage of that bankroll (most gamblers suggest 1% or 2% as your unit play, and most would advise never betting more than 5% of your total bankroll on one play). There are wagering “systems” like Martingale or the Kelly Criterion that offer some ways to manage your bankroll, but they have their weaknesses. It’s better to figure out your comfort level and take it from there. In other words, don’t play a system, but be systematic in your approach to wagering.
- Plug your leaks. I can’t tell you how many times I’ve seen a winning poker player walk away from a table up a few thousand, only to blow it all on craps or video poker a half-hour later. There’s no such thing as “playing with house money.” Once that money is in your hands, it’s your money, so why would you throw it away—after all that hard work—on games where you don’t have an edge?
- Never go on tilt. This is easier said than done, because bad beats and losing streaks adversely affect your decision making, whether you know it or not. The best thing to do in these situations is to get up and walk away. Tomorrow is another day.
- Focus on decisions not outcomes. It’s called gambling for a reason! You can make all of the right moves yet still lose—your horse gets disqualified, your opponent sucks out on the river, a back-door cover makes you want to throw your TV out the window. That’s why you need to be consistent and make good decisions. The outcome is out of your control. Keep making good decisions, and you are sure to make money in the long run.
And this leads into the next key…
REMEMBER THAT IT’S ONE LONG GAME
Greg Dinkin, poker champion and author of The Poker MBA, had this to say about money management: “Fundamentally, you win in the long term by placing bets with a positive expectation. That’s why I find it comical to hear about money-management schemes for roulette. I’ve always taken the long-view that it’s one long game. It’s never my goal to quit winners or get even for a session. As long as the game is good and I’m in the right frame of mind, I’ll continue to place positive expectation bets. My only rule for money management is to have a daily stop-loss.”
If you’re serious about being a winning player, you have to understand there’s always another race or game tomorrow. If you have a set bankroll and you are wagering according to that bankroll and your perceived edge, then a few losing sessions shouldn’t matter to you, because the only thing that matters is whether you are a winner or a loser at the end of the year. You will have winning streaks; you will endure losing streaks—but most days, you’ll be grinding it out, logging consistent wins that all add up. This is why it’s so critical to manage your money effectively. If you cap your losses, you’ll have money to play the next day and the day after that.
One thing you should keep in mind as you build your bankroll: it’s okay to set aside extra money for special opportunities—I’m talking about big-event days like the Kentucky Derby, where the pools are deep, the fields are full, and a lot of uninformed money gets tossed around throughout the day. If your typical wagering bankroll for a weekend is $300, then it’s OK to budget at least twice that for the Derby, because there are too many good opportunities to step out and make a score that day.
So how do you know what to bet and for how much?
MAXIMIZE YOUR BETS WHEN THE ODDS ARE IN YOUR FAVOR
Barry Meadow, who wrote Money Secrets at the Racetrack, said: “Proper money management, a wise guy once explained, is betting the maximum on your winners and the minimum on your losers.” The quote is meant to be a bit cheeky, but it rings true. A winning player knows how to take advantage of situations by betting aggressively (within his/her budget) when there is good value and backing off when there isn’t.
This is really the key to money management. As Meadow further explained, “The secret of making money at the racetrack … is to exploit errors in the crowd’s line.” In other words, find value.
Ah, the elusive concept of value. In simple terms, value is price versus worth. A horse’s price might be 5/1, but you think he’s worth 2/1. That’s a bet. Conversely, a horse’s price might be 2/1, but you think he’s worth 5/1: El Paso! The key to being a winning player is exploiting these discrepancies or staying away when there’s no value.
Once you’ve determined the value of a play, you then have to assess your risk versus reward. Meadow has some neat charts in his book, which show what amounts you should be betting based on a set bankroll and the respective actual price versus your perceived worth of a horse in a race. You don’t have to be so strict, however, since most players I know go by feel while working within their budget. The point is, you need to be acutely aware of when the odds are in your favor, and you should take advantage of those situations.
Sports betting is a little bit different, since most players I know typically stick to a set unit play only because the bookmakers’ lines and prices are often very efficient (though there are certainly markets where they aren’t, like future wagers or in-game wagering). Most sports bettors I know make their own power rankings and create their own spreads and totals. When their lines don’t match up with the board, they bet. The more confidence you have in your line, the more you can bet (within your budget), but if you’re starting out, it makes sense to stick to a set unit play.
Rob Miech, in his forthcoming book Sports Betting for Winners (available in November), talks a lot about prudent money management and how vital it is to gambling success. He talks about setting up your bankroll and risking a certain percentage per play. He interviewed industry veteran Roxy Roxborough, who suggested that until you are really good and understand the intricacies of sports betting, you should probably just flat bet every game using the same amount.
“To think one bet is five times better, or three times better?” Roxborough said. “Until you understand gambling a little bit better, keep (flat betting) until you find out whether you have an edge or not.”
Sports handicapper Doug Fitz echoed this sentiment.
“Bet a hundred bucks a game, and you’re 4-0 going into Monday night, and you feel so good about a side of that game, you bet a nickel, and you lose,” he said. “OK, so good for you. You went 4-1 on the weekend and you dropped money. See what I mean?”
In other words: Never overbet in relation to your bankroll.
KEEP DETAILED RECORDS
Sure, this isn’t the most glamorous of topics, but it’s just as important as every other aspect of money management. You must keep detailed records. Set up a spreadsheet and log all of your wagers: the amount, the type, the result, your profit/loss and your return on investment (ROI).
Once you have plenty of entries, you can start to analyze your play. By keeping records you can easily ascertain what your strengths and weaknesses are. Why would you keep betting college hoops if you are consistently a loser year after year?
You might think you’re a great Pick 4 player because you hit some nice ones, but the reality might be that you are a loser over the long run. If you don’t know that information, you’re costing yourself money. The opposite might also be true. You might not think you’re any good at trifectas, but it’s quite possible that you’re just a grinder who still shows a very good profit over the course of a year.
The same is true with sports bets. You might win a lot of money-line bets, but because you lean heavily toward favorites, you don’t make nearly as much as you thought you did. Maybe you’re more proficient with totals, but you don’t know it. The only way to know is to keep a detailed log.
And that leads us to the final topic, which goes hand-in-hand with keeping detailed records…
STICK TO WHAT YOU’RE GOOD AT
Being disciplined is probably one of the best character traits a gambler can have. It’s easy to go on tilt and it’s easy to think you’re invincible. You’re never as good as your biggest win, and you’re never as bad as your biggest loss. If you’ve kept good records and figured out your strengths and weaknesses, then it should be easy to focus on wagers where you know you have a built-in advantage. Once you’ve figured that out, that’s where you should focus the lion’s share of your action. Why would you throw money away if you don’t have an edge?
As you can see, effective money management comprises a range of skills—from managing your emotions and keeping detailed records to efficiently managing your bankroll and making bets where you have a decided edge. It’s easier said than done—and it’s a lot of work. One poker player I know is fond of saying this about gambling: “It’s a tough way to make an easy living.” There are no shortcuts, and it’s a lot easier to get into bad habits than it is to practice good ones—but it’s not impossible. Good money management and disciplined betting is really the only way you’re going to win in the long run if you’re serious about being a successful player.
Frank R. Scatoni, former editor of The HorsePlayer Magazine, is a co-author of Six Secrets of Successful Bettors. He currently serves as a Pick 4 analyst for Santa Anita Park, and he’s also an on-track seminar host for the Del Mar Thoroughbred Club.