Can You Really Afford to Gamble at a Casino?

Okay, so maybe you make a good living and pay all (or most) of your bills on time.


And maybe you have no moral compunctions about gambling at a casino. (I know I don’t.)

Casino gambling is a fine hobby if you don’t have impulse control or problem gambling tendencies.

But it’s only a fine hobby if you can really afford it.

Many people who think they can afford to gamble at a casino can’t, even though they think they can.

Here’s why.

You Should Have a Gambling Bankroll Separate From Your Other Funds

The best and first piece of advice I give any new casino gambler is to have a separate bankroll for your gambling activities.

On a micro level, you’ll find out what having a gambling bankroll looks like below.

Let’s say you’re going to the Winstar Casino in Oklahoma for a three-day weekend. You have a hotel room booked, and you’re looking forward to catching a show while you’re there. You’re also planning to spend some time in the bar and at the buffet.

More importantly, you’re planning to hit the slot machines hard. It’s win a jack or go bust this weekend.

You might have $3,000 budgeted for this trip. This is probably more than most people visiting the Winstar take with them, but it’s MY example, so just roll with it.

Setting aside a gambling bankroll of $1,500 leaves you with $1,500 for the other expenses you incur. If you lose $1,500 the first night at the casino, you MUST have enough self-discipline to avoid dipping into your other $1,500 budgeted for the trip.

After all, if you don’t, you risk not having enough money to eat or have enough gas to drive home.

You may think this is impossible, but I have a friend who went to Vegas and gambled away all his money on the first night of a four-night stay. He’d prepaid his hotel stay with one of those online hotel consolidators, so he didn’t have to worry about that.

But he didn’t have any money for food. In fact, he had barely kept enough money in his pocket to pay for the cab to take him back to the airport.

Does this sound like a recipe for a fun gambling vacation in Las Vegas?

Yeah, me neither.

Don’t Just Think About Your Gambling Bankroll on a Micro Level

That last example was just an example of having a bankroll for a single trip. It obviously assumed that a gambler was poor. After all, if my buddy in Vegas could REALLY afford to be gambling, losing all his money the first day wouldn’t have mattered. He’d have money in his checking account leftover to cover emergency expenditures like food and cab fare.

This is what I mean about thinking about your gambling bankroll from a macro perspective. You need to have a budget for your casino gambling hobby, and you don’t even need to consider budgeting for this unless your financial house is in order to begin with.

Getting Your Financial House in Order

A lot of financial pros will tell you that you should pay off all your debt before doing anything else financially.

I disagree.

Your first financial goal should be to set up savings for an emergency. This emergency fund should consist of at least $1,000 in cash. You need to get this money together as quickly as possible, even if it means taking a second job temporarily or holding a garage sale.

Once you have that initial $1,000 cushion, you should start working toward having three to six months’ worth of living expenses saved. This should be in a savings account at a bank. The goal isn’t to invest this money and achieve an amazing return. It’s to have money for an emergency.

Here’s the good news:

Unless you spend every penny of your paycheck, you might need to save less money for this purpose than you think. You only need three months’ or six months’ worth of living expenses. You don’t need three to six months’ worth of income unless you spend every penny you make on living expenses.

I write this in the hopes that you’re maxing out your retirement savings, which you should never have to tap into.

I’d suggest that if you don’t have an emergency savings amount, you can’t afford to gamble in a casino.

Saving for Retirement

The older you are, the more important it is to start saving for retirement today. In fact, you shouldn’t neglect this even if you’re young. Most employers no longer have retirement plans for you. And who knows how Social Security is going to be doing by the time you retire.

If you’re young, you can probably get away with saving just 10% of your income every payday toward retirement. Time and compound interest will take care of the rest.

Most employers do offer some kind of tax-deferred retirement plan, usually a 401k. Many employers even match some of your contributions to that account, at least partially.

You should contribute the maximum amount to this retirement account so that you’ll have money saved for when you’re elderly.

I’ve visited elderly people in nursing homes that cater to both the very poor and the well-off. You want to be in a nursing home that caters to people who are well-off. Trust me on this.

If you work for yourself, you have to deal with IRAs, which works more or less the same way as 401ks, only for the self-employed.

I’d suggest that if you’re not saving aggressively toward retirement, you need to manage your gambling money better too.

Do You Have Enough Insurance?

You’re not supposed to be driving a car unless you have liability insurance at the minimum. This is called maintaining financial responsibility. If you drive a newer car, especially one you financed, you should have full coverage.

That’s not the only insurance you need, either.

Unless and until the government passes some type of single-payer healthcare system, you need to maintain health insurance. At the time of writing, anyone can get health insurance during open enrollment because of the Affordable Care Act. Right now, everyone can obtain health insurance available through the marketplace.

You also need a life insurance policy big enough to replace at least some of your income for your survivors. This means having enough coverage to pay for your funeral at the least. But a more prudent life insurance plan might include enough money to pay for your kids’ college education.

If you don’t have appropriate amounts of insurance, you shouldn’t be gambling in a casino.

How Much Money Should You Have in Your Gambling Bankroll?

Unless you’re an advantage gambler, you’re going to be gambling at a mathematical disadvantage. This means you’re going to lose money in the long run. This doesn’t make you dumb or unsophisticated, it’s just the nature of casino gambling.

This means that no matter how big your gambling bankroll is, if you play long enough, you’ll go broke. It’s just a matter of how long you can stay in the game.

Depending on the length of your sessions, you will have occasional winning sessions.

But you’ll almost certainly be a net loser over the long run.

You should, therefore, consider your gambling bankroll money that you’ve set aside for entertainment.

Measuring the Entertainment Value of Casino Gambling

Since most gambling is a form of entertainment with a long-term cost, savvy casino gamblers consider the money lost gambling is an entertainment expense. Sure, on some trips, you’ll come home a winner. But more often than not, you’ll have lost money.

When analyzing casino games, casino managers use a projection called the expected hourly loss rate to compare games. This is an easy calculation, and it’s one that you can use to compare the entertainment value of various casino games.

The formula for calculating your expected hourly loss is your total hourly action multiplied by the house edge of the game.

Your total hourly action is the amount of money you risk in an hour. To calculate this, you multiply the number of bets you make per hour by the average size of those bets.

For example, if you’re a slot machine player betting $3 per spin, you’re probably making 500 spins per hour. Your hourly action is $1,500.

Here’s another example:

If you’re a roulette player, you’re probably not making more than 50 bets per hour. Even if you’re betting $10 or $20 per spin of the wheel, you’re only putting $500 to $1,000 per hour into action.

What’s the house edge, though?

It’s the statistical amount of your action that the casino expects you to lose in the long run. It’s expressed as a percentage. For example, the house edge in roulette is 5.26%.

How you determine that number is the subject for another blog post. But for now, you should understand that if you bet $20 per spin at roulette for 50 spins per hour and put the corresponding $1,000 per hour into action, you’re expected to lose about $52.60 per hour.

Short-term results won’t look like long long-term expectations, though, so you might see a win of $100 your first hour and a loss of $200 your second hour at the table.

Even though the odds of winning compared to the payout odds ensure the casino a long-term advantage, the game is still entirely random. No amount of skill will turn you into a winning roulette player.

Once you can estimate your average loss rate per game, you can start thinking about how much fun you’re having at each game. You might think roulette is about as exciting as watching paint dry, but you might love the excitement of playing a slot machine and going for a huge jackpot.

On the other hand, it might be important to you to make decisions that affect your eventual outcome. In that case, you might consider games like blackjack and real money video poker to be a lot more entertaining.

Conclusion

The great thing about casino gambling is that it’s YOUR hobby, and you get to decide how much you can afford to lose and which games are worth the money you’re going to lose on them.

The best advice I can offer you is to accept that the games have an inherent mathematical edge for the casino. If you play long enough, you’ll lose all your money.

But if your financial house is in order, you won’t have to worry about losing all your money. You can afford to gamble in a casino because you have the important stuff covered.