This was a guest post written by my friend John H. about the some cash tips he took from the felt and put into his wallet.

When you think of your bankroll you probably think about how much cash you have in your wallet or how much money you have access to via your debit card that’s not already spoken for by bills. It’s your supplementary money that you’ll use to put gas in your car this week go out to eat one night or for some random purchase love buying a box of Do-Si-Dos® from the Girl Scouts outside your local grocery store.

These things while individually are minute eventually add up to “I’m broke.” Instead of looking at your bankroll like your own personal petty cash fund think of it like poker players do their bankrolls. The average professional poker player will typically only play in cash games for which his bankroll is 300 X the large blind sometimes up to 500. If you don’t play poker then this means nothing to you except a blind is the maximum gamble that the game will start out at. You don’t truly need to understand this though to apply the strategy to your own life. Think of it as only making purchases that are equivalent to or less than a certain percentage of your bankroll.

For the sake of not being ridiculous let’s lessen the number to 30 X your bankroll. Inflation has pushed the cost of Girl Scout Cookies up to about $4 per box in most regions of the US. Do you have $120 in your bankroll to cushion the loss of the $4? You want two boxes? You should have at least $240 of extra money in your pocket if you plan on splurging. Only purchase the Girl Scout Cookies when your bankroll can afford the blow. When you are running low on cash you won’t be capable to afford 30 X the purchase and if you’re disciplined you won’t buy it; thus not running out of money before your next paycheck.

Another scenario: You have a date. Going out to party at a really expensive restaurant like Ruth’s Chris Steakhouse for two people would run you at least $100 (more if you plan on ordering martinis). If your bankroll has at least $3000 (30 X $100) to cushion the loss then by all means you can afford it and your wallet won’t sustain as well harshly. If you’ve got more like $200 in your pocket Applebee’s is running a special that includes an appetizer and two entrees for $20 and $2 20 oz. beers—now that’s a date you can afford.

There’s another semester for this it’s “living within your means” which some people don’t do especially when they get mixed up with credit cards but that’s an entirely different story and it’s been addressed on this blog already. Of course the number “30” is not the exact number for everyone as there’s no perfect formula that fits every single person when it comes to finances. However in such tough economic times as these using restraint and moderation with your money is more than mildly important. Find a number that works for you but just stick to it. Try it for one month and see how much money you have leftover in your bankroll.

After you’ve practiced bankroll management as described above you hopefully actually have some money left through above your monthly expenses. Now you can receive a percentage of that amount and put it away in your “savings.” In keeping with the poker theme poker players don’t take all their money with them to the casino (the responsible ones don’t anyway). They put away what their original investment was plus some and then continue to construct on to their adjusted bankroll.

You’ve managed to pay all of your monthly bills and budget yourself to only spend 30 X your bankroll for an entire month. At the end of the month you have $250 left over. Take 50% of that and put it away. So you now have a savings of $125 plus another $125 to throw into the pot for the next month’s bankroll. That following month you’ll essentially have more money to cushion your spending. Stay disciplined though; this does not mean that you should blow your extra cash on iTunes. Stick to your bankroll management but you’ll have a little more free reign with what you can spend in relation to your bankroll (i.e. perhaps this week you can afford Long Horne Steakhouse).

This one is for those who have credit card debt. Take the same sample above. Instead of “saving” your extra $125 throw it towards the balance on one of your cards (that is if you have the will power to not use that card which hopefully if you’ve come this far you do). Continue whittling it down each month in this way until it’s gone. Then your extra cash can go to another credit card or to that desperately neglected savings account.

As in poker life throws some things at you sometimes from left field. If you’ve heard of a bad defeat in poker you understand that it means that a player who otherwise had a killer poker hand got beat by a better hand. Bad beats occur in life too. For instance if you are a homeowner you know that things happen to your home that need fixing. If you have kids they need stuff. If you own a car no thing how new reliable or gas efficient it is it will eventually need job done to it. These things happen. Such is life. However with the bankroll management tools explained here you’ll be prepared for a bad beat.

If a poker player loses his entire bankroll on one bad call then he’s out. He’s out of chances to risk anything whatsoever. If he is smart though he hasn’t lost it all on one hand. He’s been preparing for something like this since he first decided he’d sit down at a poker table and play a session. He may have to move down to smaller limits in order to build his bankroll up (instead of playing at the $25 blind table he’ll move to the $5 blind table—something closer to his bankroll divided by 300).

You need new tires on your car. This is an expense that is not part of your monthly bills. You must dip into your bankroll and/or savings in order to afford this repair. No problem. If you’ve been following the rules suggested in this article you have some fluff to your bankroll especially behind a few months like this have gone by. You may be able to take half of the expense from your cushiony savings report and half from your pocket or 60%-40% etc. But the key here is that once the expense is taken concern of you must be prepared to “move down to a lower limit table.” Tighten up on your spending again to cushion the blow to your wallet/savings that the tires cost you. Move down to only purchase at the 25 X level for a couple of weeks. You’ll be able to move back up but you don’t want your quality of life to suffer severely down the road when you have another unexpected expense come up.

Bankroll management in poker is applicable to personal budgeting tactics. Everything must be considered in terms of thee4b bigger picture. If you don’t have a mental grab of your spending to earnings ratio you’ll never be able to establish savings or make investments or worse yet survive those inevitable pitfalls of life.

(Photo: jamadams)

Money Tips I Learned from Poker from personal finance blog Bargaineering.com.