How to manage your bankroll like a pro

 How to manage your bankroll like an expert

As the clock approached 3 :00 pm, I watched in anticipation. In a matter of minutes, the school bell would ring to announce freedom. I ran to Kevin's place, and then back to my locker just in time to play in the Friday Special poker tournament.

While 448 people had paid the $30 entry fee to win the grand prize, only one would be awarded the $2,688 cash. How could I have predicted that eight hours later, that lucky boy would become me?

As a high school student it felt like my life had suddenly changed. Two grand seemed like a lot to me. So I took my friends to Chili’s and ordered not just one but two bowls full of endless tortilla chips. I decided I wasn't rich enough to have to wait for my waitress to refill my first bowl. (With age comes some wisdom. I was an idiot, not rich.

However, this first tournament win made a lasting impression on how I saw the world. This was my first encounter with an asymmetric betting strategy, where one takes a small risk to win a lot. Asymmetric bets have the potential to yield enormous returns.

What are the risks of playing in poker tournaments?

The idea of losing small and winning big is appealing at first glance. After winning the initial tournament, I was hooked and stopped playing cash games. My only requirement was to win consistently 50x my money, and I would be a millionaire in no matter how fast I tried! What could go wrong?

Over the next few weeks, I chased after my next moonshot until most of what I earned was lost. Although asymmetric bets can be extremely profitable, they are also very risky. I put my tail between the legs and I returned to cash games with what little money was available. These were less exciting but more consistent.

I came across two approaches to poker. The slow, steady grind of cash games or the thrill ride with the amazing upside of tournaments.

I oscillated between the formats in waves, with tournaments eventually eating away at the steady returns. For me, this binary of all-or-nothing approach was never a good idea. Either I was taking too much risk in tournaments or getting enough reward in cash games, it would not work for me.

There had to be an easier way.

How poker players manage their banksrolls to maximize their returns

I wish I had the opportunity to earn the return tournaments promised, with the stability of cash game play.

Intuitively, it was obvious to me that the higher the stakes, the lower the capital needed. This assumes that the greater the reward, the less likely an event will occur. However, professionals value the difference.

One buy-in is required to win 50 or more in a poker tournament. However, the player's chance of winning depends on the payout. This case, 2%. Naturally, players with a skill advantage have a higher chance of winning. This is the place where the expected return is realized.

Due to the extreme asymmetry of tournaments I would not need to risk large amounts of my bankroll in order to produce exceptional results.

It was several more rollercoasters before I realized that I needed a system for how to divide my bankroll between tournaments and cash games. I wanted to maximize my returns while minimising my risk, which would give me stability as well as excitement. I was disappointed to lose more money in online tournaments that I had entered, but I resolved to find a way.

It was called 'The 80/20 Bankingroll' and I modeled it directly after The Pareto Principle.

The 80/20 Bankroll Management System

The Pareto Principle is commonly known as the 80/20 rule. It states that 20% of all effects are caused by 20% of the causes.

A business may receive 80% of its revenue from 20% clients. This rule has also been observed in other areas. It is possible to find 20% of one's clothing worn only 20% of the time.

The Pareto Principle could be applied in business and life, so why wouldn't it apply to poker bankroll management?

It seemed like a good idea so I tried it. To make a steady income and guarantee a profit, I'd use 80% for cash games. The remaining 20% would go to tournaments, which offer greater risk and reward.

Although there are subtle tweaks that can be made, like planning for expenses, taking photos, buying and selling items, this system has been my mainstay for managing my bankroll throughout my poker career. bankroll management keys to profiting in poker