Gambling With Disposable Income

You’ve probably heard it before, but most professionals recommend only gambling with your disposable income. But what does this mean, and how do you ensure you’re truly only gambling with what’s left over?

Paying your bills first, putting money into savings, and having a maximum spend are all ways to ensure you only gamble money you can afford to lose. Read on to learn more about gambling with a disposable income only.

1. Pay Your Bills First

Disposable income is known as what is left after you pay your bills. This means paying your rent or mortgage, health insurance, and setting aside money for groceries. If you don’t know how much you spend on average on groceries monthly, now is the time to figure it out. Whatever average number you come to, we recommend adding a small buffer, such as $100, to ensure you are not restricted.

If you have a car, this also includes paying for that, as well as insurance and putting money aside for gasoline purchases. Like groceries, you should have an idea of what you spend on gasoline monthly. If you don’t, now is the time to figure it out.

We truly hope you have a good idea of your monthly budget, including subscriptions, dinners out, and more, but if you don’t, now is the time to do so. Don’t be afraid to use an online budgeting tool to help you understand where your money is going each month.

2. Set Aside Money for Savings

In recent years, as living costs have ballooned, individuals have saved less and less. As such, Charles Schwab estimates that 40-59% of Americans are just one paycheck from homelessness. This means that most Americans have no money saved, or if they do have savings, they are less than a single paycheck.

As an adult, you should have 6 months of your income (or the minimum you need to survive) set aside for an emergency. You never know when you could lose your job or face a disaster that could cause you to need extra money. While we know it isn’t possible to save six months of income instantly, we recommend putting away at least 90% of the money you have left after paying bills each month, until you do. For example, if you pay your bills and have $500 left over, $450 should be added to your savings account.

Once you have reached the goal of 6 months of living expenses set aside, you should still add to savings each month, but you can contribute much less, say 40% of the remainder, instead of 90%.

3. Set a Gambling Budget

After paying your bills and your savings account, you have your disposable income leftover. Now is the time to decide, however, what you want to do with that money.

For example, do you want it all to go to gambling? That’s fine if you do, just know you may have to turn down other fun things, like nights out with friends, or a concert you find tickets available for at the last minute. Because it can be difficult to predict how your month will go, we recommend only dedicating a portion of your disposable income to gambling.

Of course, the percentage you devote is up to you, but we recommend no more than 50%. This means if you have $200 left over after bills and savings, you would have a gambling budget of $100 each month.

4. Don’t Be Afraid to Make Changes

The cool thing about disposable income is you won’t miss it when it’s gone—because it truly was something extra. That being said, if you find yourself missing that money or no longer enjoying gambling, don’t be afraid to make changes.

If your budget is more restrictive than you would like, you could consider setting aside less for last-minute purchases or cutting back in other areas to increase your gambling budget. While you shouldn’t cut back on savings, you may decide that you don’t need that Netflix subscription after all, leaving you with a small boost more for gambling.

If you find yourself unable to stop gambling, even when you aren’t having fun, it may be time to seek help.

5. Decide How You Will Address Winnings

The cool thing about gambling with disposable income is that it doesn’t matter if you lose it—you didn’t need it anyway. But what happens when you win?

As far as we see it, you have two choices with the money you win from gaming:

1.        You categorize that money as more disposable income or

2.        You consider the money won to be regular income.

If you chose the first option, then any money you win, you can put it back in or spend it on drinks/tips/food in the casino without having to worry. When the money you won runs out, you will just return home as if you’d lost your whole gambling budget without winning. Just remember that at the end of the year, you may owe taxes on these winnings.

However, for those who wish to have a different approach, we recommend considering your gambling winnings as regular income. This means that when you win, that money is put somewhere separate from your gambling budget. Then, you put some of the money into savings as you did in step 2, and divide the rest using your normal principles. This means, if you won $1,000 and save 40% before taking half of the remainder to gamble, you would immediately place $400 in savings, then take 50% of what is left ($300) and put this back in your gambling budget.

While this might seem like some mental gymnastics, approaching winning like this can help boost your bottom line—growing your savings, while still giving you some money to gamble. But we know that everyone is different, and if you would rather just put everything you win in your gambling budget, that’s fine too, as long as you are paying bills and your savings before you play, you are truly gambling on disposable income.