Budgeting for Gambling & Bankroll Management

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Before you begin a gambling session, it’s important to decide what stakes you’ll play for and how much you’re willing to lose. It’s just as important to stick to that plan no matter what happens. Making financial decisions in the middle of a gambling session is a recipe for disaster, as it’s too easy to let emotions cloud your judgment.

Most gamblers play for fun, which is especially easy with lessons like this one in our Bonus Casino School. But playing for fun means setting a budget that balances the thrill of big wins against the amount of money you’re willing to spend on entertainment and how long you’re hoping to play for.

Betting so little that you can’t win an amount that’s meaningful to you makes the game less exciting. On the other hand, having to quit a session early is also no fun. Going over budget and losing more than you can afford is even worse.

However, even professional gamblers need to plan carefully. Having an edge over their opponents doesn’t guarantee that they’ll win. The difference is that instead of budgeting their losses, they need to have a bankroll and a plan to manage it.

For a professional gambler, running out of money means losing the potential for future income. If they can’t bet, they can’t win, so they can never let their bankroll go to zero. But reducing stakes also means reducing their winnings. So, budgeting for a professional gambler means balancing short-term profits against the potential setback of a losing streak.

Both types of gamblers need to track their sessions. All of us have a tendency to overestimate our net winnings and underestimate our losses. Fortunately, most regulators require sites to provide players with their session histories. If you’re an online casino user and haven’t checked your history recently, do so! You might be surprised at what you find.

How Much Can You Afford to Gamble?

It's important to set a budget when you gamble.The first step in planning your gambling is figuring out how much money you’re comfortable spending. Remember, you might win or lose in any given session, but over the long run, gambling for fun means you’re paying for entertainment.

The first step is to decide on your overall monthly entertainment budget if you haven’t already. Take your after-tax income and subtract all your mandatory spending:

  • Mortgage or rent, home maintenance
  • Food
  • Clothing
  • Utility bills
  • Healthcare
  • Childcare

What’s left gets split between savings and discretionary spending, like entertainment.

Example budget

Say you make $3,500 per month after tax, and those mandatory expenses add up to $2,500. That leaves $1,000. If you want to put $500 per month into savings, that leaves $500 for entertainment.

If you’re comfortable spending a quarter of your entertainment budget on gambling, that means $125 per month for gambling and $375 for other forms of entertainment or shopping.

Factoring Luck Into Your Budget

The randomness of gambling is what makes it fun. However, it’s also what makes it tricky to plan for.

If you decide to go out to your favorite restaurant, you know roughly what you expect to spend and how long you will be there. But when you’re gambling, you can’t really know both of those things at once, because you don’t know how lucky you’ll be.

If your plan is to gamble for a certain length of time, you might lose more or less than you expected, or you might even come out ahead. On the other hand, if your plan is to play until you lose a certain amount, you might do so very quickly, or you might start on a lucky streak and be there for a long time!

To account for luck and ensure you have an enjoyable time, you’ll need a somewhat more sophisticated plan than just limiting your time or your losses. Here are three suggestions you can experiment with. They each have their own pros and cons.

Method 1: Double or Triple Limit

One simple and effective responsible gambling strategy is to limit both your time and your losses. For instance, you might decide to play for a maximum of one hour but quit early if you’re down $100. That’s what we’d call a double limit.

You might also set yourself a target profit and say that you’ll also walk away a winner if you’re up $100 or more. That would be a triple limit and is a good idea if you have a tendency to lose back your winnings while trying to win more.

A variation on this would be to limit your time per session, but your losses per week or per month. For instance, you might commit to ending each session after half an hour but stop until next month if you’ve accumulated losses of $100 or more across all your sessions this month.

Pros: Gambling harm can take the form of lost money or time. By putting hard limits on both, you’re keeping yourself as safe as possible, as long as you stick to your self-imposed rules. In most states, regulated online gambling sites provide you with the tools to set these limits for yourself and will cut you off if you exceed them.

Cons: Hard limits can be frustrating. You may find yourself wanting to extend an enjoyable session a little longer, or having to quit much earlier than you wanted after an unlucky streak. However, once you start bending your rules, it becomes harder to follow them in the future, and it can become a slippery slope into gambling addiction. Using this method means you have to be willing to cope with that frustration.

Method 2: Budget for Expected Losses

If you know a game’s return-to-player (RTP), you can calculate your expected losses for a session.

For instance, if you’re playing slots for an hour, you’ll probably play about 600 spins. If you’re playing for a dollar per spin, and the game has a 96% RTP (typical for online slots), you will win an average of $576 back over the course of your session, for an average net loss of $24.

If you gamble regularly, this means you can pick your session length and set your stakes so that your long-term losses fall within your budget. However, this is the riskiest strategy if you’re not being careful.

Pros: By trusting your luck to even out over the long term, you can gamble for a fixed length of time, regardless of whether you’re up or down. You’ll never have to quit early and will always walk away ahead if you have a winning session, rather than being tempted to gamble until you’ve lost it all.

Cons: This is only a “safe” way to play if you are very financially stable and your bank account can handle the occasional bad session. In the slots example above, your budgeted average loss is only $24, but you could still lose up to $600 in a single session if you’re very unlucky. Don’t try this method if there’s any chance you’re going to try to chase your losses after a bad session or suffer serious consequences from losing more than you budgeted for.

Method 3: Keep a Gambling Fund

Instead of budgeting for each session, you can keep some money set aside for gambling and top it up according to a fixed schedule. For online gambling, this is easy because you have to deposit to your casino account before playing anyway.

You could, for instance, decide to deposit $25 each week, regardless of whether there’s already money in the account. That way, you’re still limiting your potential losses, but can extend your playing time by gambling with money you won in a previous session.

If you do this, you should also have a strategy for cashing out. If you leave money in your gambling fund indefinitely, you’ll eventually lose it all. So, you might plan to cash out half your balance any time it goes over a certain amount (say, $400) and buy yourself something nice with it.

Pros: Keeping money in your gambling account gives you flexibility. You can play shorter sessions sometimes and longer ones at other times. You can hang on to winnings from a good session and use them to keep yourself afloat through a bad one.

Cons: You’re not putting any time limits on your gambling this way and also not capping your losses for any given session unless you impose additional rules on yourself. There’s a risk of losing self-control and either playing longer than you wanted or losing several sessions’ worth of winnings in a single sitting due to frustration.

Beware of ‘Double-Spending’ After a Winning Session

Buying things with your winnings but still treating them as part of your gambling budget can lead to overspending.Whatever your strategy, there’s an additional danger with gambling beyond the immediate losses. This is the temptation to “double-spend” your winnings by spending them on other types of indulgences but then also mentally adding them to your gambling budget.

If you do that, then you’ll eventually lose the money that you won while overspending on other things in the meantime.

This can happen to any gambler, but it’s especially a problem with the second and third methods above.

If you’re budgeting according to expected losses, you need to hang on to your winnings to offset future losses. The time you’re up $500 and the time you’re down $550 even out to an average loss of $25. But if you spent that $500 instead of hanging on to it, you actually are out $550.

Similarly, if you’re keeping a gambling fund, you need to be disciplined and spend winnings only after cashing them out. If you spend from your savings because there’s extra money in your gambling account, you run the risk of having a losing session and never actually cashing out that money you were counting on.

How the Pros Do It: The Kelly Criterion

When it comes to advantage gambling, bankroll management is a whole game in and of itself.

Getting unlucky and losing a bet that was statistically profitable comes with what an economist would call an opportunity cost. That is, having lost the bet means the gambler has lost the opportunity to take other, potentially more profitable bets in the future.

There’s a mathematical rule called the Kelly Criterion that tells you what percentage of your bankroll you should risk on a bet, assuming you know the odds of winning.

It looks like this: % = (P x b P) / b

Here, % is the optimal percentage of the bankroll to bet, P is the percent chance of winning, and b is the profit on a win as a proportion of the amount wagered.

For instance, imagine you have $10,000 in your bank account and are offered a coin flip (p = 0.5) with a generous 2-1 payout (b = 2).

The Kelly Criterion would recommend that you bet 25% of your bankroll on this, or $2,500:

(P x b P) / b = (0.5 x 20.5) / 2 = 0.25

Obviously, in most real-world gambling situations, the gambler’s edge will be much smaller. The Kelly Criterion would recommend a smaller bet size in those cases. Professional sports bettors, for instance, rarely commit more than 1% to 2% of their bankroll on any given bet, perhaps 3% or 4% if they feel they’ve spotted a golden opportunity.

Notably, the Kelly Criterion will give you a negative number for any standard casino game. That’s because the odds are in the house’s favor. In other words, it recommends that you not bet at all if you’re trying to make money.

That’s the difference between professional and recreational gamblers. Most of us are willing to lose some money to have fun, so the Kelly Criterion doesn’t apply.

Casino School: Strategy

This has been Strategy Lesson 3 of our four-part Casino School series. Next up is Strategy Lesson 4: Online Casino Strategy for Having Fun.

About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for Bonus.com, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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