Money management

6 June 2013

By John Grochowski

Jeff is an old friend, one I meet for lunch three or four times a year, just to catch up. He’s not really a casino player, though he’ll tag along with his wife and play the slots once in a blue moon.

Our conversation rarely centers on gambling, but this time he had a question from Darcy, his wife.

“She wants me to ask you about money management,” he said. “She says you don’t write very much about it, and she says a friend who’s a manager in the casino told her it was the most important thing players had to learn.”

It’s certainly important, I told him. A player who’s undisciplined about managing money can blow the budget for the day in within minutes. Sound money management can help you stretch your budget through a fun day in the casino, and help you walk out the door with money in your pocket.

But sound money management really comes down to three basic principles: Don’t bet money you can’t afford to lose. Don’t give back all your winnings when you’re ahead. And don’t chase losses when you’re behind.

“That all sounds like common sense,” Jeff said. “From what I could gather from Darcy, the manager made it sound like money management was the key to winning.”

More a key to staying in the game, I told him. Money management systems can’t change the house edges on the games. A slot machine that returns 90 percent of wagers to players is going to keep 10 percent in the long run no matter how disciplined the players’ approach. Your results in any one session can be good, bad or indifferent, but that’s all built into the odds of the game. Your money management approach has nothing to do with it.

Same thing on the tables. At double-zero roulette, the house is going to average a 5.26 percent cut of all money wagered -- a shade more once the 7.89 percent house edge on the five-number bet on 0, 00, 1, 2 and 3 is accounted for. You can’t change that.

What you can change is your bankroll’s exposure to the house edge. And that’s where the three money management basics come in.

Under not betting more than you can afford to lose, setting a budget for the day and not going to the ATM when it runs out is basic. But the point also applies to not risking too much of the day’s budget at once. If you have $200 to play for the day, you shouldn’t be playing $5 slot machines, where 10 two-coin bets can break you just like that, or $25 blackjack, where your whole stake comes to eight bets. That’s a $5-$10 blackjack budget, or a 25-cent and below slot budget.

Don’t give back your winnings when you’re ahead is simple enough, but some players find it difficult to master. A woman once told me she’d won $1,000 on a quarter video poker machine, stepped up to dollars and lost it all the same day. I told her my first move in that situation is to put away half the winnings immediately. Stepping up to dollars with some of the rest is fine, but if you lose $100 or $200, be prepared to move back down to quarters. The half that’s put away is there to go home, no matter what.

As for the warning against chasing losses, it’s easy to let things spiral out of control if you increase bets to try to win back losses. The odds of the game don’t change just because you’ve been losing. Chasing losses is a recipe for financial disaster.

There are some money management systems that can help. When on multiday trips, some players divide their money into daily bankrolls. If you have $1,000 to play for three days, then you might take envelopes filled with $330, $330 and $340 -- one envelope for each day. If you go through one day’s envelope, don’t touch the others. You’re finished playing for the day.

Or you might use a system of floating win goals and loss limits. If you start with $100 at a blackjack table, you might decide on a win/loss goal of $50. If you drop to $50, you leave the table. If wins take you to $150, most players won’t want to leave right away, so you adjust up. Now you leave the table if you drop to your original $100, and re-assess if you keep winning and shoot up to $200. That keeps you in the game when you’re winning, and gets you out before you spend too much of your stake.

None of that can overcome the house edge. It just reduces your exposure, in keeping with money management basics.

Jeff took it all in, and said, “I’ll pass that all on to Darcy, but I think she was hoping for something a little more magical that would make her win.”

I laughed. Everyone wants that. But not losing too much is a start.

Look for John Grochowski at www.casinoanswerman.com, on Facebook (http://tinyurl.com/7lzdt44) and Twitter (@GrochowskiJ).