Credit and Bankroll Management

ryanhealy · Aug 04,2005, 10:33 PM

Alright heres a little intro to my question. All of my poker playing life, albeit brief, I have been playing outside of my finacial abilities. I have never played so high that I felt I was the sucker or couldn't beat the games, but regardless I was out of my bounds financially and when I would go in slumps, even brief ones, they would make significant hits to my bankroll.

Now right now I work a crap assed little job for the summer between school and I make 10 bucks an hour and hate every minute Im at work.

I've played live 5-10 before and from what I saw at the tables, the competion was NOT that stiff. FOr instance, at Brantford, its the second lowest game spread, and although there are some good players, a lot of them seemed like theyd be fish even at the 2-5 tables.

Now I'm not saying I'm anything special when it comes to poker, but I am VERY confident, that I could grind out 10 bucks an hour playing 5-10, if not a little more, and have a lot more fun doing that than I do at my current crappy job. The only thing holding me back, is that I dont have the bankroll.

I feel like to play good at 5-10 and be able to take the ups and downs, Id need about $3000. However, I don't have that kind of money as I have other expenses and just cant save for poker right now!

So my question is this, does it make sense to get a Student Line of Credit and use some of it for a bankroll? Id be eligible for about 8000 a year since Im a fulltime student, with an interest rate of something like 6%, where I only pay interest monthly, and the payments on principal dont have to be made until a year after Ive graduated. So I would be elgigible for more than enough to give myself a healthy bankroll, and Im confident I could make money playing 5-10. I'll be getting a Line oF Credit regardless to cover various school costs, but Im wondering if its ok to use part of it for poker.

With the interest rate so low, and the principal payment not due until a year after Ive graduated, this SEEMS like an excellent way to get some immediate capital for my bankroll. However, I just feel like there is something fundementally wrong with playing poker with a loan.

What does everybody think about this? Is this a legitemate way to start a bankrolll, or is gambling with borrowed money always a bad idea?

Dead Money · Aug 04,2005, 10:46 PM

I have to admit that I would never think of taking a loan for a bankroll.

You will have to pay it back, if you loose your stack, you are SOL and still no bankroll.

My advice, DON'T.

moose · Aug 05,2005, 12:22 AM

I know this guy. His name is Teddy KGB. He should be able to help you out...

http://www.opgh.on.ca/
http://www.olgc.ca/knowyourlimit/

AcidJoe · Aug 05,2005, 08:28 AM

I take it by your reply Moose you think a loan to finance a bank roll is a bad idea.

Dude, a Bankroll is money that is available ONLY for poker (sports betting, horses etc) that you do not need to live on and can afford to lose. Once you have the worry about borrowing paying interest and HAVING to make money with it, it will affect how you play and what you do.

So now you borrow 8K, lose 2K because of bad beats, bad play, bad luck, bad cards whatever. PLUS you probably quit your job so you could "make 10 bucks an hour" playing poker. Leaving you with 6K for school. All 8K will have to be paid back. Now if things actually go good, then the whole thing was redundant. As a former gambler full time if you ain't got the roll DON'T.

Mind you I was playing the horses but it still applies.

beanie42 · Aug 05,2005, 08:37 AM

Bad idea - nuff said.

Wolffhound · Aug 05,2005, 09:00 AM

Horrendous idea.

To borrow money from a bank to play is a recipe for disaster, especially if you are in school. If you can't save money for poker how can you pay back the loan? If you lose the money (real possibility considering swings) how do you pay back the loan?

Cut back on your beer and stuff and start squirrelling the money away. If its something you really want to make a run at, make the sacrifices to do it.

Good luck with your decision, but, to me, its a simple one. No.

ScoobyD · Aug 05,2005, 01:14 PM

I know what you're saying about the 5-10 in Brantford, but how many hours have you actually logged? Have you made meticulous records of your wins/losses? You also have to consider additional expense like transportation, tipping, etc, not to mention the interest charges on the loan. Playing with borrowed money is playing with scared money too (at least I would be). Why not just consider building the roll yourself online through lower stakes games (as well as the sweet bonuses) offered online? It may not be immediately glorifying, but there's something to be said of the value you put in your roll when you have built it from the ground up...

ryanhealy · Aug 05,2005, 02:24 PM

Thanks for the posts guys. I think I'll liten to all of your advice.

Like I said in the original post, it always felt like it was a bad idea to gamble with borrowed money.

I guess the way I was looking at it though is that people take out loans for business capital all the time, and poker, if approached that way, can be treated as a business, so if I thought there was a very good chance I could profit from the venture, the loan would be worth it. Especially with 6% annual interest and no principal due until after I come out of school, hopefully into a decent paying job in the Aerospace Engineering field.

However, thinking further, Im the kind of person who likes to be prepared for the worst, and even though it would be pretty unlikely I'd go broke, it's still possible, and if that did happen I'd be stuck bad. So its probably better off that I not, regardless of wether or not I think its a positive EV move.

So thank for all the replies.

fisticuffs · Aug 05,2005, 02:31 PM

As a student, who is well in debt via a bank loan, the answer is a simple DO NOT do it!!! A bank loan is ok(not great, gov't loans are a little better) for a student loan, even though 6%/yr sounds good, but considering you have to pay interest monthly for 4yrs and then full principal, its not as pleasing as it sounds. The beauty is that banks advertise a low rate, but there are so many other factors to consider. Cost of living, inflation rate, tuition rates rising, penalty clauses, are your parents going to co-sign etc... The student loan should be used for a student loan!

Debt is not a concept to toy with, especially in a continuing society where credit means everything, and if you have a bad rating good luck securing future assets, such as a home or a car. Unfortunately we cannot deduct interest payments for tax purposes, for corporations believe it or not debt is welcomed, but once again it has to managed very carefully.

I hope you get the idea of all these replies, do not use a loan for poker! Enjoy school while you can, when you get a steady income, you can put away a portion of each pay to a poker bankroll for you to maneuver with.

Good luck with school and at the tables....but we all know luck is an unsystematic risk, and in the long run it becomes smaller and smaller..right, but how long is long Â*

Â*(sorry thats my economics/finance classes coming back to me)

fisticuffs · Aug 05,2005, 02:36 PM

Quote:

Originally Posted by ryanhealy

I guess the way I was looking at it though is that people take out loans for business capital all the time, and poker, if approached that way, can be treated as a business, so if I thought there was a very good chance I could profit from the venture, the loan would be worth it.

Sorry, i wrote my response as you posted yours. Interest on loans for a business are tax deductible, they conserve cash and therefore worthwhile(sort of). For a loan to be valuable your return on it must be more than in cost you(ie: return > 6%) but there time value of money issues, risk profiles etc...in case you are interested.

ryanhealy · Aug 05,2005, 02:49 PM

Just out of curiosity,
If I were to use say $3000 of available loan to fund a bankroll, at 5.75% interest annually, my annual interest payment would be $172.50, or less than $15 per month.

So theoretically, if I could ensure* that I could make more than $172.50 a year at the 5-10 tables, would that then not make the loan a +EV move?

*obviously this word is the problem. However Ive gotta say, Im pretty certain that 17 big bets over the course of an entire year of grinding those tables wouldnt be difficult.

fisticuffs · Aug 05,2005, 03:13 PM

I like the way you think.

To play the devils advocate.

How many hrs would you play poker a month?

Now, compare that to a $10/hr part time job.
If you worked 10/hrs a week you would make roughly $5200 ignoring taxes and EI(depends on how your taxes are set up) a year.
You would want to make more than that playing poker. 10hrs of poker/week for a year(52 weeks) to make $172.50, thats roughly $0.33/hr.

It comes down to opportunity cost. Exchanging one payoff for another, giving up something of value now for somehting of value later on.

Im sure my little scenario has many flaws, as I have never used a cash flow statement for poker purposes, please feel free to comment or add as needed.

That would be an interesting question. How much would it cost to play poker for a year considering risk etc...compared to an average job of lets say 45K/yr(how much would you have to make playing 5-10 or even 10-20) I would love to see an estimate on these, for anyone who is interested.

ryanhealy · Aug 05,2005, 03:22 PM

Quote:

Originally Posted by fisticuffs

Now, compare that to a $10/hr part time job.
If you worked 10/hrs a week you would make roughly $5200 ignoring taxes and EI(depends on how your taxes are set up) a year.
You would want to make more than that playing poker. 10hrs of poker/week for a year(52 weeks) to make $172.50, thats roughly $0.33/hr.

This is what makes me think that this could be a worthwhile possibility. I would only have to make $.33/hour to make the loan a break even move. Thats roughly 1/30th of a big bet. So, at the tables, I would only have to earn 1 big bet every 30 hours over the course of the year to break even!
Being very confident I could make significantly more than that, this would at least SEEM to be a very +EV scenario to me.

beanie42 · Aug 05,2005, 03:45 PM

Quote:

Originally Posted by fisticuffs

That would be an interesting question. How much would it cost to play poker for a year considering risk etc...compared to an average job of lets say 45K/yr(how much would you have to make playing 5-10 or even 10-20) I would love to see an estimate on these, for anyone who is interested.

Having just read Dave's book, I remember him presenting the numbers for $6/12, and basically you couldn't make a living at it, even full-time.

Quote:

Originally Posted by ryanhealy

However, thinking further, Im the kind of person who likes to be prepared for the worst, and even though it would be pretty unlikely I'd go broke, it's still possible, and if that did happen I'd be stuck bad. So its probably better off that I not, regardless of wether or not I think its a positive EV move.

Quote:

Originally Posted by ryanhealy

This is what makes me think that this could be a worthwhile possibility. I would only have to make $.33/hour to make the loan a break even move. Thats roughly 1/30th of a big bet. So, at the tables, I would only have to earn 1 big bet every 30 hours over the course of the year to break even!
Being very confident I could make significantly more than that, this would at least SEEM to be a very +EV scenario to me.

It sounds like you've talked yourself in a circle.

ryanhealy · Aug 05,2005, 03:51 PM

Nope, Im not going to do it
Im just saying, it seem to make sense. I wont do it though because as much as it seems to be a +EV move, Id still feel like Id crossed the line. Theres just something unsavoury and wrong feeling about gambling with lent money.

Also, as for making a living, thats not my goal. Im a student and I dont work in the winters. This would just be a way to bring in extra cash on the side. I wont have a job anyways in the winter since my course load doesnt allow me to commit to any fixed work schedule.