Summary: Unless you have a special advantage, gambling obviously never makes financial sense. In the long run, virtually everyone loses money. Yet, many people, including myself, who accept this fact continue to maintain long-term gambling habits. This isn't necessarily irrational, which is why I've filed this gambling post under the human need category of entertainment. I'm prepared to pay a reasonable amount for worthwhile entertainment, which includes the excitement of gambling. However, this rationale also implies that I better be getting value for my money and time expended. So if you can't fully escape the appeal of gambling and don't have a serious gambling problem, there are sensible ways to better manage this dangerous habit. I'll discuss my approach in this post which may help others formulate their own.
Details:
1. How much money does the average adult lose on gambling each year?
The Economist provides the recent averages for the key countries:
Australians gamble (and lose) the most: an estimated $1,130 for every adult in the country, owing to a highly penetrated bricks-and-mortar market and a high propensity to gamble. A sizeable share of the losses are spent on "pokies" or video-poker machines. Australia has the highest concentration of such machines in the world, on which a person can lose over $1,500 an hour, though tighter regulation on these have seen the country fall to sixth place in absolute terms in recent years.
The Economist: Betting the house
When you consider that many Australian adults don't gamble at all and others only very rarely (e.g. Melbourne Cup horse race), it's clear from these averages that many habitual gamblers are losing thousands of dollars each year. For many, this would clearly have a significant overall adverse impact on the quality of life for themselves and their families.
From a simple living perspective, I wouldn't want to spend more than $300/year on gambling entertainment. So I am conscious of these enormous losses ($20 billion a year; $1,130 for every adult) and take the dangers of gambling to my finances very seriously. I don't bury my head in the sand.
2. Do you have a gambling problem or are you at risk of developing one? If so, what should you do about it?
In a culture that has normalised gambling, it's common for typical gamblers to dismiss the possibility they might have a gambling problem and believe it only affects a specific psychological mindset. In fact, all gamblers can shift along a continuous spectrum, where problem gambling simply exists at one end. I'd encourage anyone who spends more than 15 hours a year gambling to do a self-assessment quiz to determine where they exist on this problem gambling spectrum. See: Gambling Help Online - Risk Assessment Quiz
Below are my results showing I am currently on the Low Risk part of the spectrum. This is mostly due to fortunate financial and life circumstances. While this survey didn't ask the question, my main gambling problem is getting sucked into spending too much time on it. The solution is to satisfy the excitement need in very time-efficient ways.
This post makes solely rational points about gambling that those at the lower end of the risk spectrum might find useful. For those above the lower end of the spectrum, it's necessary to take more serious and direct action, starting with contacting the problem gambling helpline in your country or city. In Australia the main starting point is: Gambling Help Online, where you can talk to someone online or on the phone.
3. Most gambling problems are money related, so all gamblers should create, and stick to, monthly and yearly budgets
The biggest issue with gambling is that most gamblers do not have or stick to gambling budgets and nor do they track how much they've spent on gambling. This is complicated by the fact that many people gamble in multiple ways (pokies, lotteries, casino, racing, sports), for which have no single method of easily tracking or budgeting:
In a typical year, I spend $0 on pokies, lotteries, keno and on-track/TAB racing. I spend less than $50 at the casino. And so the only thing I need to budget for and track are two online sports betting accounts (Betfair, CrownBet).
Personally, I manage my gambling budget and expenditure through not depositing additional funds in my sports betting accounts. My Betfair account balance typically varies between $700 and $1,100 each year with no further deposits. I funded my CrownBet account with an initial $50 deposit, but I would limit further deposits to less than $100/year. In 2015, my total amount of deposits to Betfair will be $0. My total amount of deposits to CrownBet will be $50-$100.
For gamblers who lose significant amounts regularly but feel the entertainment expense is justified and is within their budget, the best control tool is to use the built-in "player protection" limits. Betfair includes four types: Loss Limits (e.g. $100 per month); Deposit Limits (e.g. $30 per week); Time Out (24hrs to 30 days suspension); Self Exclusion (ban for at least 6 months). Self exclusions cannot be reversed while changes which increase betting for the other three types take 7 days to apply.
Not all gambling websites/accounts provide all of these options, but most include self exclusion and deposit limits (also known as pre-commitment limits). The key use of these player protection tools is to prevent chasing losses which is something even the most disciplined gamblers are susceptible to.
4. Tracking and understanding your lifetime gambling results (losses)
Most gambling websites and accounts do not let you see your lifetime or annual profit/loss because for 90% of gamblers the losses would be alarming and might lead them to reduce their gambling and better control spending. Instead gambling sites typically provide just the latest 3 months which are always volatile and deceiving:
However, the gambling providers all have and actively track these lifetime and annual profit/loss figures and most will provide them if you ask firmly enough. Until recently, Betfair had no way to track lifetime profit/loss online, but it did send via email a lifetime profit/loss spreadsheet on request.
Betfair now does indirectly allow you to track lifetime profit/loss online through its Premium Charge account page (created for other purposes). It would be interesting to know if regular access and tracking of this lifetime account figure would be a significant control on people's gambling. Below is my lifetime Betfair profit/loss (unfortunately in pounds) as of 7 September 2015. I will be keeping an eye on this lifetime figure for as long as I use this account, to ensure my gambling isn't going down a long-term path I'm not comfortable with.
I made most of my ~$12,000 of Betfair profits years ago on less than 10 of the 3,662 markets I've gambled in - markets in which I had some specialist knowledge (politics, financial affairs). Across all of my sports gambling I have eventually ended up losing slightly on all sports (football, cricket, etc) as the long-term commission accumulation (Betfair has the world's lowest at 5% as it is an exchange) eventually overwhelms luck and any minor advantages (promotions, price arbitrage, better prices due to lack of liquidity).
On higher commission gambling products, the long-term commission accumulation rapidly pushes all accounts deeper into negative territory. There are virtually zero long-term pokie, casino or racing gamblers that have positive lifetime balances. The long-term result is always negative; the only exceptions are those like me who've had an exceptionally large win that compensates.
I'd be curious to know whether most gamblers who lose over $1,000 a year, each year, would be affected by a growing lifetime loss figure. Personally, I feel that if my Betfair lifetime figure was growing over the last 10 years toward negative $12,000, I would have cut back my sports gambling as the entertainment value wouldn't justify the opportunity cost of that money.
5. Using the value-driven "envelope" approach to set aside maximum monthly/yearly gambling entertainment expenses that are actually justified
Once you've used your lifetime losses to realise that gambling is never a potentially income-generating hobby, you can treat it the only rational way you should: as a simple entertainment expense.
Firstly, if any of your gambling is not really entertaining enough anymore (e.g. buying lottery or keno tickets or solo visits to the pokie machines or casino tables), then you should be aiming to end it. Just like any discretionary expense, if the value received is less than the opportunity cost (other things you could be spending the money on), you should switch to using the money in a better way.
Many people who gamble considerably on the lottery, keno and other ways that have little social interaction are only doing so out of habit rather than because they still find the activity a worthwhile entertainment expense. Remember that if you truly feel that the dream of a lottery win is worth the monthly expense, you can still keep the value of the dream but spend the minimum possible (e.g. the cheapest ticket per month).
All good budgeting websites, guides and apps refer to an envelope (or category, bucket) approach for classifying how to allocate your discretionary monthly income. The essential method for anyone who experiences money anxiety or issues due to gambling is to ensure all gambling expenses are controlled by a monthly budget. Gambling deposits and spending can never be allowed to sit outside a monthly budget.
Ultimately, you should incorporate only planned, worthwhile gambling expenses into a broader Entertainment category. But if they are currently extensive, you can create a temporary Gambling Entertainment category just for them. Once you have assigned a maximum, desirable monthly expenditure to gambling entertainment you can ensure you don't exceed it by using a system (smartphone app, notebook) to track each month's expenses.
Over time, it's normal to see gambling expenses downsized in proportion to other entertainment options (many of which have little financial cost and deliver more lasting enjoyment) and also in proportion to other life goals - such as things you are saving for: better housing, transport, holidays, family, etc.
6. Applying the same value-driven envelope/category approach to your time
As gambling has had no negative monthly, annual or lifetime financial impact on me, it would be easy to claim there is little possible adverse impact. In reality, I find that when money is not an issue, how you spend and invest your time is a much more significant factor in your quality of life. I have definitely spent more time gambling online on sports than is justified by the additional enjoyment compared to the opportunity costs.
Rather than taking on the challenging and time-consuming task of quantitatively budgeting and tracking my time to reduce time wasted on gambling, I have thought about where and how most of this time is wasted (generally just before watching sporting events or during them) and how to make it less easy.
Some suggestions include:
- Limiting how many devices you install gambling apps on
- Not installing VPN apps to enable live online betting in Australia (it's banned)
- Betting in small amounts that do not require monitoring or encourage covering
- Reducing the number of sports I gamble on
- Reducing the number of markets within a sport I gamble on
- Making gambling websites slightly harder to access (e.g. bookmarks, visibility)
- Limiting social gambling with friends to a defined account and timeframe rather than using my individual account at any time
- Not gambling on sports or events that require gambling-related time to be invested that otherwise wouldn't be (watching, monitoring, new bets)
Further Info:
Australian Government Problem Gambling
> The Facts
Gambling Help Online
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