For businesses and individuals, budgeting is an invaluable tool for growing towards financial goals and protecting against financial emergencies. It takes chips to win chips and poker players learn how to get the most out of their budget experimentally. From a healthy money mindset to an optimized bankroll strategy, here’s how to manage a budget by accessing the power of poker.
Prioritizing
By definition, budgets have constraints. When you have finite resources and limitless wants, prioritizing is a crucial step to ensure your dollars are working as hard as you do.
In poker, prioritizing is taking stock of the opportunities you have and managing your bankroll based on what you want to play and its risk level. If you mainly play ring games (lower risk games where you can enter and exit as you please) but you see an opportunity for greater winnings in a beginner-friendly tournament series, you might take a shot because the tournament is a higher priority. If a friend tells you about a crazy game running in Houston this weekend, you may pony up the travel costs and miss a few nights at your local cardroom to get in on the action.
We can apply this method of surveying opportunities to best invest our resources in our personal budget. Conventional wisdom says that beyond our pressing needs like food, rent, and transportation expenses, we should aggressively save the remainder to build an emergency fund, extinguishing toxic debt, and maxing out any 401k contributions our employer will match.
With this roadmap for financial independence in place and the lowest hanging fruit picked, we can begin to dedicate a part of our budget to fun stuff like nice meals out, vacations, or the newest phone!
Reporting
Accounting inaccuracies are costly and prevalent. An estimated 88% of spreadsheets contain errors leading to $7,000,000,000 in annual IRS civil penalties. Poker players track their in-game stats for online play and their overall results by location for live play.
Savvy poker players capture their sample of hands-on systems like Poker Tracker, record sessions right after they leave, and track their results and expenses in password-protected spreadsheets to monitor their progress. These are some of the best practices for budget reporting: using powerful software, recording information as soon as it becomes available, and creating systems to keep your data organized and secure.
When managing the household budget, it’s not only important to make a budget, but to track it accurately as well. We often think we are spending less on things until we see it written down in black and white. Many budgeting tools have mobile apps for tracking in real time.
Forecasting
As companies grow or individuals anticipate costs like a new house or car, it pays to factor these future investments into your current budget.
Break down different scenarios for future income weighed against costs. Should you cut back or liquidate assets now to prepare for a downpayment? How sustainable is your company’s spending if a hiccup in revenue were to occur?
Poker players constantly forecast their playing environment. They predict the game types, geographies, and connections that will become more valuable down the road. This means they follow trends in poker to future-proof their game. Transitions like Limit Hold’em to No Limit Hold’em as the de facto game, Nevada to California as the hub for action, or public to private as the setting for the best games won’t pass you by if you’re regularly forecasting.
The professionalization of poker is predicated on building a skillset that scales over time. Putting in the time to grow those skills will pay dividends when you raise the stakes, so planning for the future is an inherent motivation when learning poker.
The value of flexibility
Because life is fickle, some months of living will simply cost more than others. Home repairs, job loss, moving expenses, or medical emergencies can squeeze your budget tighter than you had planned. If your budget is flexible and you have other sources of cash you can draw from, these moments turn from a serious stressor to an inconvenient speed bump.
Poker players know the value of budget flexibility all too well. You may be playing in a great game, but suddenly the stakes are doubled and you can’t comfortably play anymore. If you have a network of people who trust you to subsidize a portion of the entry cost for a portion of your winnings, you can stay in the game no problem! The more liquid your bankroll is, the more seamlessly you can transition between games and weather a storm of bad luck.
How do you keep your personal budget flexible? Keep a healthy emergency fund on hand and think of how you might reduce your spending on certain items by 10% if the need arose. Certain costs are fixed like your health insurance or utility bill. But other spending, such as brand name clothes or your morning Starbucks could probably be cut down in a pinch.
Accounting for taxes
A common pitfall for new tax filers, particularly self-employed workers, is failing to budget for taxes. When April comes around, it can be suffocating to discover you owe 20% of what you made last year if you hadn’t set it aside in budgeting.
Tax implications are on the top of every poker player’s mind since their taxes aren’t deducted from their winnings, and their winnings vary from year to year. Poker players adjust their strategy based on their performance that calendar year – playing more ring games in slow years to capitalize on the lower average tax rate and playing more of the tournament circuit in good years to take advantage of the tax deductions by itemizing buy-ins and travel costs.
When it comes to taxes, it’s best to be cautiously pessimistic about how much you’ll really have after paying your share. Tax season will show how well you prioritized, reported, and forecasted your spending throughout the year and the money on the table is worth the time you spent managing your budget.
Budgeting is just one of the many business skills poker teaches. If you want to learn strategic decision-making, risk management, negotiation, and how to bet big on yourself, join the 1,000,000 women learning poker through Poker Power! We’ve saved you a spot in our classes, are you ready to take a seat at the table? Unleash the power of poker and sign up today.
