Someone trying to earn money from playing poker has to know when to hold and when to fold

A FULLTIME poker player needs to treat it as a business and see if it is really profitable, writes the Barefoot Investor.

You need to work out when to cash in those chips.

A FULLTIME poker player needs to treat it as a business and see if it is really profitable.

 

CRAIG ASKS: I’m 23 years old and play poker fulltime and currently earn about $150k a year. The scary thing is, my family come from nothing and have struggled financially their entire life. I have about $250k net worth (fluctuates a lot) and I’m unsure what to do with my money. I have zero debt, and about eight different accounts for budgeting as I’m very strict where my money goes. I also have $40k invested into Vanguard index funds. Do you have any advice for the future?

BAREFOOT REPLIES: I can help you with your finances, but with your poker playing, I’ll have to defer to my good mate Kenny Rogers. What advice would you give to Craig, Kenny?

“On a warm summer’s evening …” Kenny, get to the point. “Sorry! Craig you’ve got to know when to hold ’em, and when to fold ’em.” Craig you’re like any small business owner starting up: you have fluctuating income but fixed living costs, and there’s a good chance your business could go bust. So I’d treat your poker playing like a business: have a set amount of capital to put into the business (and no more), then analyse the returns you’re achieving each financial year and only continue if it’s profitable.

 

GROWING ACORNS?

MONIQUE ASKS: I was wondering if you could look into Acorns and give us your thoughts. This new investing app was on the news last week.

BAREFOOT REPLIES: In the last few weeks I’ve had a closer look at Acorns. It’s basically just an app. The idea is to use technology to make investing small amounts of money easy. The app collects small amounts from your bank account (like rounding up your purchases, so it’s like investing loose change). You can set it to regularly drag money out of your account as well. Acorns then invests your money into exchange traded funds. My problem with all these fintech apps (which are sometimes called robo advice), is that they add another layer of fees. It’s cute if you’re just getting started (you have to be over 18 to have an account), but if you’re serious about investing your savings, I honestly don’t think I’d bother.

 

TEACH WISELY

DAVID ASKS: Our 18-year-old son has a disability. He is still at school and earning a pension, which provides him $18,950pa. We are saving all this money, and so far $35,000 is growing in a high-interest savings account (about 3 per cent). We would like to invest some of his money wisely in an ethical fund. His income can then grow until the day he can live independently. We guess this will be more than five years away. What would you recommend?

BAREFOOT REPLIES: As far as an ethical fund, investment bank UBS has a series of exchange traded funds with ethical “tilts” that screen out companies involved with tobacco, weapons, and Mariah Carey. Your son can earn $4264 without the pension being reduced, so he would need more than $150,000 before there was an impact under the Centrelink income test. There’s also a question behind the question here, and that is that one day you’ll be gone and your son will have to fend for himself. Depending on the nature of his disability, I’d use the next five years to teach him the basic behavioural building blocks of personal finance. My direct experience working with people with mental disabilities is that they have the ability to be very good money managers.

SCHEME SMELLS FISHY

IAN ASKS: My waffle-free question is this — is Saivian a pyramid scheme? I searched your page but found nothing.

BAREFOOT REPLIES: Unfortunately I don’t keep a full list of every pyramid scheme on the internet on my website. Interestingly, the more questionable companies are getting better at gaming Google — manipulating the search engine ranking so they bury any of their bad press. So, that means we’re going to have to do something we haven’t had to do since Google was invented: you’re going to have to think for yourself. Saivian’s website describes their service, which appears to be a form of network marketing, as “almost like doubling your money in value every year by simply doing something you have always done”. That sounds questionable to me, plus the website has a distinct spray-on hair-in-a-can feel to it.

DON’T SKIP ON SUPER

MATT ASKS: I need you to knock some sense into my mum. My parents are both in their early 50s … both have no money in super (they are self-employed and do not pay themselves any) and they are saving madly for a house. She is looking at houses worth $600,000 in value with a deposit of 10 per cent. She does not want to “keep paying someone’s else’s mortgage” but I am suggesting she should start paying into her super, buy a small house when we all leave the nest, and enjoy her later years (not in debt). What say you?

BAREFOOT REPLIES: You are making total sense, and you are completely right — but that totally doesn’t actually matter. They don’t want to have their dreams doused by their son. They are thinking emotionally, and you are thinking mathematically. So take a leaf out of Malcolm Turnbull’s playbook — get someone else to deliver the bad news. Arrange for them to see an independent financial adviser who can tell them exactly the same thing.

 

barefootinvestor.com

The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice

Originally published as Someone trying to earn money from playing poker has to know when to hold and when to fold