I regularly listen to Daniel Negreanu’s weekly rants which I find on Cardplayer.com. I find them enjoyable. His April 25 rant inspired this column although Negreanu was talking about poker and this column is about video poker.
For anybody attempting to be a professional gambler, the three major financial questions you should address are: How much can I make as a gambler? What kinds of financial swings can I expect to endure? How much does it cost to live?
The first question relates to EV. What is the estimated return on the game? How much coin-in to I play each month? What are the typical amounts I can expect from drawings and other promotions?
The second question relates to variance. And the bankroll required to deal with it.
I’ve had a number of columns addressing these two questions in various ways. Today’s column is about the third question: How much does it cost to live? Or in poker terms, what is your nut?
It’s easy to include the obvious things that come in the form of regular monthly bills you have to pay — such as rent (or mortgage), car payment, food, gas, child support, etc. But there are a whole lot of additional expenses that come regularly, but always monthly. Such as car maintenance. Insurance. Clothes. Social life.
So you add these things up. When you need to estimate, estimate HIGH. Things rarely turn out to be less expensive than you planned.
If you have regular income coming in (perhaps a salary, pension, Social Security, alimony, etc.), you get to subtract that off from what you need.
It’s hard to know how to count valuable assets in this equation. You usually have to sell these assets to turn them into cash. This is often harder than you think. You can always sell a house, for example, if you’re willing to lower the price enough. But selling a house quickly can yield you 50% or less of its value.
If you’re responsible for more than yourself, you need to factor in the expenses of the other(s) as well.
When you add this all up, are you still above water? If you’re making $1,000 a month gambling (which is not a trivial accomplishment), but your expenses are $2,000 a month, you’re on a path that is going to lead to some tough decisions.
There have been thousands of gamblers who have gone broke one or more times over their careers. Including me once in the late 1970s. If this happens to you, how will you deal with it? If it would be a disaster to start over again then you need a larger nut than if starting over would be no big deal.
For me, going out and getting a job at age 32 wasn’t something I wanted to do — but it wasn’t awful. I dealt with it for 12 years until I was able to save enough — and improve my skills enough — that I was willing to try the professional gambling gig again. But today I’m 65. With a wife almost that old. With both of us rather used to some of the finer things in life. Going broke now would be a significant hardship.
One guy I know plays poker and video poker when he has some money and works as a day laborer when he doesn’t. That’s not a life I would want, but it seems to work for him. But he’s getting older — as all of us do. People are more willing to hire the muscles of a 20- or 30-year-old than they are a 50- or 60-year-old. Sooner or later, it’s certain that age and medical circumstances will make him unemployable as a day laborer. What then?
Some players do not want to go through the financial planning exercises to determine what their nut is. I recommend you at least have a better-than-casual understanding of whether you can succeed at this business. Going broke at gambling is largely predictable if you pay attention.
The only people who “need” to consider what their nut is are those who are close to the edge financially. If you have a large amount of wealth or income compared to the stakes you’re playing, your nut doesn’t matter. You can take care of your expenses out of pocket change.
But if you’re not rolling in the dough, considering what you nut is is a good way to get a picture on your necessary finances