Money Management

Money management is a subject that generates some controversy in the world of personal finance and in the world of poker. In the specific area of cash-game and tournament poker, some people feel that the term “money management” is a bit misleading. In their opinion, the more accurate term would be “bankroll management.”

A close look at how these terms differ will help any poker player understand how to control money used for playing poker, whether the action is online or in a live poker room.

No, no: It is Bankroll Management

This is significantly different from “money.” A player might have a lot of money because he has personal wealth but this is not necessarily his bankroll. If he is an adventurer, as some pros call it, he might actually consider his entire net worth as his bankroll.

Money versus Bankroll Management: An Example

In contrast, a player may have $100 to his name and sit down at a table with a minimum bet of $20. The $100 is his bankroll, of course. But it’s also all of his money. How can he manage his money? How can he manage his bankroll? There is a difference.

A quick read of the first 10 to 15 pages of Doyle Brunson’s “No-Limit Hold’em” chapter in Super System 2 (Cardoza Publishing 2005) doesn’t turn up even one mention of money management. The legend writes a lot about getting his money in with the best of it and the worst of it. He discusses ways of winning big pots and winning small pots. But there is not detailed discussion of money management in this chapter.

Math in Bankroll Management

Mason Malmuth is an individual who seems to take a different look at the general subject of gambling. But his thoughts might fit rather well with players such as Brunson and other pros. Malmuth dismisses the idea of “money” management and goes with bankroll management. Even then he writes, “I don’t quit or stay because I either lost or won a predetermined amount of money.”

This mathematician and poker player urges players to narrow their focus a bit and look within a particular game. How much “money” a player needs depends on two factors: win rate and standard deviation. Ask this question: How often do I win a pot? Then ask: How much does my bankroll go up and down within the game I am playing? That’s the start of bankroll management.

In conclusion, let’s see what poker pro and author David Sklansky has to say about money management. In his book The Theory of Poker (Two Plus Two Publishing 1987) he writes that we “should not play in a game whose limits are so high in relation to your bankroll that you cannot play your hands correctly because you don’t want to risk going broke.”