The Big Honking Guide to What to Do With Your Poker Loot
If you work hard enough at poker, at some point you'll start making money. No, really. If you keep moving up in limits, that profit will grow larger. At a certain point, your profits will exceed the bankroll you need to play the limit you're at, thus posing a nice quandry: what to do with your poker winnings?
(Couple of quick caveats. This obviously applies to money management in general and not just poker profits. I'm also just a normal monkey who has experience with all of the stuff below. I'm not a financial advisor, though, or a professional of any sort, so take it all with the proverbial grain o' salt.)
Letting money sit in your Neteller account is -EV. That's completely dead money that's doing nothing for you. So the first step is to decide on what you absolutely need, as far as your poker bankroll, and withdraw the rest from Neteller.
Once that's done, you basically have two choices:
1) Spend the poker profits
2) Invest the poker profits
I won't dwell long on #1, as it's pretty self-explanatory. There's a lot to be said for buying loot or paying for a vacation with poker profits. Making the results of all of that grinding and poker playing tangible is a really, really good feeling. I encourage everyone to do it at some point. That said, most rich people got rich from saving and investing, not from spending money.
As far as investing, if you do absolutely nothing else, strongly consider opening an Orange Savings account from ING Direct. If you think you might need access to poker winnings to replenish your bankroll or just want to keep it completely liquid in the event of a financial crisis of any sort, an Orange Savings account is a great choice. It's all electronic, FDIC insured, no annual fees or minimum required balance, and you can open tan account with as little as $100. They offer a variable 3% annual percentage yield, which is much better than anything your bank is currently offering you on your savings account, and likely better than most money market accounts. The Orange account is linked to your existing checking account and you can move funds back and forth easily, with tranfers usually being completed with 2 business days.
A quick note about savings. You'll see different numbers tossed about, but you generally want to have 6 months-12 months of living expenses in liquid traditional savings. Anything more than that is dead money. No, really. In the best case scenario, any interest you earn from a savings account does little more than keep pace with inflation. So yes, indeed, saving every penny you can is a very, very good idea, but that logic doesn't extend to simply dumping those pennies into a savings or money market account. You're losing money by dumping too much cash into your savings account. What's worse is that due to the lovely magic of compounded growth, you actually lose more money the longer you put off investing in other vehicles with a higher rate of return.
If you're willing to commit to more long-term investments, there are plenty of choices.
If your poker profits include affiliate money, then you have an extra potential wrinkle to add into the mix. While it depends slightly on your situation, you really should consider setting up a corporation for any affiliate money, even if it doesn't on the surface seem to be worth it.
You can incorporate in most states for anywhere from $100-$500 dollars, usually on the lower end of that scale. The paperwork is fairly minimal and you can do it all yourself, without the need (and expense) of a lawyer. You'll have to file assorted documents throughout the year with state and federal governments. Don't be fooled, it's sort of a pain in the ass, especially if you don't like paperwork.
There are however, some nice advantages to incorporating, especially if you make a decent amount of affiliate money and you're the only employee of your corporation. The biggest advantage is that you can set up a SEP IRA (Simplified Employee Pension Plan), which is very similar to a traditional IRA account but one that allows you to constribute up to 25% of the compensation paid to you by the corporation (up to $41,000 or so) in pre-tax dollars in an IRA account. This is a very good thing and can be set up in addition to any existing IRA account you have. It's also very flexible, as you can contribute at any time during the year, any amount you like.
Aside from a way to invest affiliate profits in a tax-deferred vehicle, incorporating for the affiliate side of things also allows you to potentially write off all sorts of related expenses, such as Internet access, office supplies, computers, furniture, monitors, trips to Vegas, etc.
If you incoporate as a S Corporation, any profit/loss falls directly to the bottom line of your annual income, so a paper loss from the corporate activites can actually give you a bit of a break on your personal taxes when it's tax time. So having a booming, successful affiliate business isn't exactly a prerequisite to incorporating, although it doesn't hurt.