Poker Podcast
Becoming A Poker Pro
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The idea of being a poker pro is alluring. You are your own boss. You play when you want. You study when you want. You have nearly infinite vacation days. You can travel on a whim to a tournament series on the east coast, or take a month traveling in Europe, and find grind sessions when your schedule allows for it. That’s a sexy life if you ask me.But being a poker pro is more than just a cool title. There are lots of things to consider before you pull the trigger and quit your day job. If you’ve been flirting with the idea of going pro, give this podcast episode a listen and the entire guide a read.This guide is complete with my opinions on the matter, but please check with your accountant and local tax experts for answers that are personal to you, your situation, and your exact location.What Is Your Survival Number?Do you know exactly how much it would take to maintain a cost of living that appeals to you? This includes rent/mortgage, utilities, food, entertainment, etc. Of course, if you are single living in Vegas this number will be far lower than if you are supporting a family of 4 in NYC. And to be honest, whether you end up going pro or not you should know your bare minimum number to maintain your lifestyle. Take a moment and jot down the lowest amount of money you would need to earn to retain a lifestyle you would be OK with.Poker Winnings & EstimatesMost players consider going pro after a period of poker success – maybe that’s a great month at the tables or it’s a solid year. And when they start fantasizing about quitting their job and playing full-time, they do all of their calculations on their current winrate. This is an issue for a few reasons:The smaller the sample of recent wins, the less reliable they areYour winrate today is not a perfect predictor of future winratesYour winrate will change when you start playing full-timeFor instance, a $1/$2 live player has been crushing for $32/hr over the last month (60hrs of play). Forgetting for a moment that 60hrs of live play is only about 1.8K hands, which is a very minimal sample size – they would start calculating a possible full-time poker income. They start by saying “well, I’m going to play 40hrs/week and I’ll just multiply 32*40*52 and get my annual gross income of ~66K”This is wrong on SOOOOO many levels. Your current job may require 40hrs/week, but as a pro you would set your own schedule. For giggles, go find anyone who has ever gone pro and ask them how many hours/week they put in the very beginning vs 6 months later. Trust me – the number almost always trends downwards. You also won’t play every week – especially if you are traveling for the tournament circuits and you’re going to need decompression time after extended you have the self-discipline to set and keep a grind schedule?Oh yeah…and that $32/hr they started working with – that’s a nonsense number too. That’s $32/hr in recent time which is above the average hourly rate in that game AND it’s not significant at all due to the sample size. Also remember that even if your winrate in this game were $32/hr – that’s THIS game. You can almost never get a special home game to run enough hours per week for you to play it enough, and your winrate can be very different in various locations. Split Tip: When running this calculation, take your recent hourly rate and divide it in half. Then multiply it by 1200 (30hrs/week * 40 weeks/year). If you could reasonable live on that gross annual income, continue reading… The RakeNo, I’m not talking about the rake that gets taken out of every pot you play. I’m talking about the bigger rakes – like taxes and other expenses. This gets massively overlooked by most players considering this transition, so let’s break it down.If you currently work a normal 9-5, chances are the taxes are automatically taken out of your paycheck. And in the beginning of a new year you file your taxes, and voila, you get some money back from the government. Awesome!As a poker pro, you are responsible for paying your own taxes and you’re almost always going to have write a large check to the IRS in the beginning of each new year – yeah…they aren’t sending you a check anymore. Welcome to being your own boss!Taxes range from state to state, yet alone from country to country. Some places have tax-free gambling winnings, but most don’t. Check with your local tax professional and run some numbers with them. Even if they charge you for an hour or so of their time – it’ll be the best money you’ve ever spent. Get answers on this stuff early and avoid being surprised at tax time. There is nothing worse than getting a bill for $20K when you weren’t expecting it. Split Tip: Figure out your expected tax rate and remove that from your gross annual income. If you are in the US and just want to ballpark it, just use a 25% tax rate for estimation purposes. So if your estimated gross annual income is $100K, setting aside 25% for taxes leaves you with $75K to live on… Listen to the Paying Taxes as a Poker Player podcastAlong these same lines are poker-related expenses. Now, a traveling tournament/circuit player is going to have much higher expenses due to all the travel, hotel/AirBnB, etc. – so if you plan on going that direction make a one-year plan and figure out the estimated cost. Can you reasonably handle that bill with the annual income minus taxes that you calculated from above, or is it too high?Which brings us BACK to taxes. If you currently have a 9-5, chances are you file your poker winnings as a recreational player (you ARE already filling taxes as a poker player, right?). When you switch over to being a full-time poker player you can file as a pro (again, check with your accountant for information on your exact situation), and as a pro you get taxed differently and as I understand it this makes it easier to write off poker-related expenses such as training, traveling for poker tournaments, etc. This can massively influence your tax burden – so if you are serious about making this transition – PLEASE GO SPEAK WITH YOUR ACCOUNTANT!Work HoursIf you made it this far through the guide and are STILL interested, high-five! Now it’s time to talk about the stuff that nobody wants to talk about openly. As your own boss, you get to set your own hours. This is attractive in theory, but something many people struggle with. It takes a lot of motivation and discipline to set hours and keep those hours – and when dealing with the mental swings of being a poker player it can be very tough.First, think of a normal 9-5. You show up, you work for a few hours, you grab lunch, you work for a few more hours, and then you go home – and chances are there was some Facebook time and/or inter-office socialization in between those working hours. In a normal non-commission job you get paid whether you put in an A+ day or a C- day. Hell, you could have a D+ month and chances are you wouldn’t lose your job. THIS DOES NOT WORK AS A POKER PLAYER.Go ahead, try and put in D+ work for a week on the tables and see how your winrate is affected. And besides that, you don’t get paid for lunch. You don’t get paid vacations. You don’t get paid to peruse Facebook. You don’t get paid unless you put in work AND avoid running like hell. And this is the honest truth that players who consider this transition need to face: it’s VERY difficult to put in the necessary volume at the highest-caliber when you are running like hell.This issue is that most players consider this transition when they are in a good season of poker. Things have been going well, they’ve been banking away some money, and things are looking up. They don’t consider the impact of a bad week or bad month and how that would affect them mentally (and how that then trickles into how well they play and how many hours they can reasonable put in) – yet alone when a bad month stretches into would a bad poker week or month affect you mentally?You won’t know exactly how you would handle this until it actually happens – but be brutally honest with yourself. If you’ve encountered rough stretches in life and it’s resulted in you being utterly-depressed and unable to function well – that’s going to happen when you are a poker pro. And to be honest, for people like that, playing poker as their sole source of income is a pretty awful idea IMO.Study HoursLet’s say the overly-inflated winrate you were so stoked about winning for the next 3 years was real – you’d need some serious study to continue making that winrate over time. Poker is constantly in flux and the game is constantly getting tougher – which means you need to study diligently to stay on top of the game. But there are two issues here:Most players aren’t used to studying 10+ hours/weekStudying enough can be difficult during bad stretchesBe honest with yourself about your poker study habits when things are going well and when things are going poorly. I personally get a bit addicted to study when things are going poorly – which is good for getting out of bad stretches faster but not great for work-life balance.Raw NumbersNow that we’ve worked through the bummer stuff that nobody wants to talk about (but we all desperately need to think about), let’s get into some math. Remember, these are mostly my opinions and estimates and your situation may vary significantly.First, figure out your monthly cost of living (COL). This is simply adding up all of the expenses you have in your life. This includes the basics like rent/mortgage and food shopping, down to the smallest of things like your Netflix and Red Chip Poker PRO subscriptions. BTW, you can usually write-off poker-related education like video training memberships when you file as a poker pro. For example purposes let’s say our COL is $3K. Split Tip: When in doubt, over-estimate anything you have to pay for and under-estimate anything you would earn. If things look good in the worst-case, they look GREAT in reasonable-cases! Second, factor in things you are now accountable for. When transitioning from a 9-5 to a poker pro you usually pick up two major things: taxes and health insurance. Most people forget about both – so if your employer has been handling health insurance make sure to factor that into your total COL.Third, estimate gross annual income (GAI). You did this way earlier in the guide…Now, take GAI and multiply it by .75 (this accounts for an estimated 25% tax rate). Take that number and divide it by 12 (this is your monthly estimated income). Subtract your COL. If this number is negative, your plan looks negative as-is. If this number is positive, your plan looks profitable as-is!Keep in mind, this is back-of-the-napkin math and doesn’t account for write-offs, unexpected expenses, increased income when you move up, etc. For a better and more personalized estimate, please speak with your accountant.Nest EggsWhether or not your answer from above was positive or negative, let’s talk about eggs. Yes, they are a delicious breakfast food – but we’re talking about nest eggs as in cash that’s set aside for our transition. In order to go pro, I would want NO LESS than 6 months of cash stashed away. So multiply your COL (including estimated tax obligations) by 6 and have that amount of…