Something very bad happened to me the other weekend. I lost $800 dollars betting on the 49ers to win the Super Bowl. Earlier, I had won $600 betting on the 49ers to beat the Vikings and the Packers. But lost it all and then some when the 49ers couldn't hold onto their 10-point lead.
I told my father about my losses because I also bet him a steak dinner that the 49ers would win. Instead of showing empathy for my loss, he immediately questioned whether I have a gambling problem.
I responded with an emphatic, “No I do not!”
But isn't denial how all gambling addicts respond when they are first questioned? It's only when gamblers recognize they have a gambling addiction that they can start to heal.
Why I Gamble So Often
My dad's questioning about whether I have a gambling problem made me dig deep while I was relieving myself on my heated Toto Washlet – a life changing product that brings me great joy every day.
Between 1999 – 2012, I worked on the trading floors of two large investment banks. Every day, my colleagues and I were either taking long or short positions in stocks or pitching long or short ideas to institutional clients.
When we weren't betting on stocks, we were betting each other on The Masters, the World Cup, the US Tennis Open, the NBA finals, the NCAA tournament, and of course football.
Once, we bet our first-year analyst that he couldn't eat $20's worth of Taco Bell before tax ($30 inflation-adjusted today) in one sitting without throwing up for an hour after. He could choose anything on the menu, from burritos with extra sour cream to a large drink, both of which would be strategically unsound.
We made a $1,000 market on the floor for believers and disbelievers. Our eater would earn 25% of the pot plus all the free food if he won. He stopped at $18.60. It was so much fun! We still gave him $100 for trying.
Then, of course, I've mentioned to you my escapades playing poker at the local casino. During one $200 buy-in session, I got to know a man named Vien who borrowed $5,000 from a good friend and $2,000 from his ex-girlfriend to pay for his gambling habits.
I never thought of myself as having a gambling problem like Vien because I have never borrowed money to cover my gambling debts. But my father's words made me pause and think.
I explained to my father that gambling was in my DNA after so many years of working in Institutional Equities. But he was skeptical about my explanation and pressed on, “How long can you sustain losing $800 a bet? You should be more careful.”
To get him off my back, I retorted, “I can actually sustain losing $800 a bet 88 more times based of my Tesla winnings, baby!” Tesla's stock had risen a crazy 19.89% or $19,414.50 on February 3, 2020.
A gambling addict tends to be defiant. He or she likes to rationalize his or her bets.
For example, I started rationalizing that it was OK for me to bet $800 on the 49ers because 2019 was such a good year in the stock market. I also told myself to chalk up the $800 to entertainment. It wasn't like I was paying $5,000 for tickets and flights like my 25-year-old softball buddy who just got a full-time job.
Then I told myself I have the right to do what I wish with my hard-earned money, like a true gambling addict! Who was my father to disapprove of me having some fun.
Finally, I truly thought the 49ers had a great chance of winning the Super Bowl. And for more than three quarters, I was right. Alas, it's not how you start, it's how you finish. The 49ers and I are both losers.
Coming To Terms With Gambling Addiction
My father has made me realize that I am a gambling addict who needs help. With two kids and a wife to support, I need to change my ways before they truly get out of hand.
In one Super Bowl evening, due to my gambling addiction, I wiped away almost an entire month's worth of target passive income.
Remember, in order for me to FIRE by 45, my ultimate goal is to generate $833 a month in incremental passive income every six months in order to ultimately generate $5,000 a month in passive income by September 1, 2022.
If I don't make more passive income by 2022, I'm afraid my investment accounts will no longer be able to cover health care insurance premiums and education costs. Without enough capital, I won't get to fulfill my dream of being a full-time father to my daughter until she goes to kindergarten.
Originally, I was thinking of coming up with a framework on how much you should be allowed to gamble.
My gambling framework was to go something like this:
Step #1: Gamble only what you can afford to lose.
Step #2: Quantify how much you can afford to lose by gambling to no more than 5% of your investment profits. This way, you'll never really lose because you are only gambling a small portion of your winnings. If you have no winnings, you aren't allowed to gamble.
Example: Let's say you were up 160% or $72,000 on Tesla in 1.3 years. You could take 5% or $3,600 of your profits and gamble it on whatever you like. Perhaps you'd like to split your $3,600 into six different $600 bets. Or maybe you want the thrill of making one big $3,600 bet. It's up to you! Even if you lose it all, you're still up $68,400 or 155% on your Tesla investment.
On the flip side, if you win the bet, this would mean even more gravy for your potatoes. In a heads you're still winning, tails you win more scenario, life is pretty good.
The Best Way To Kick Your Gambling Addiction
As I reviewed my above gambling framework, however, it occurred to me that if someone has highly addictive tendencies, it would not be a good framework to follow.
After losing $3,600 on a bet, they might decide to withdraw an additional $7,200 in profits to make another bet to make up for their losses. If they lose again, then they'd be down $10,600 and the death spiral continues.
Heck, the gambler might even go on margin and lose even more money. This is how gambling addicts fall into financial ruin! They just don't know when to quit.
Therefore, I say the best way to kick a gambling addiction is to stop gambling completely. It's the same recommendation for recovering alcoholics. Instead of craving the thrill of a quick win, focus on the slow and steady way of earning money by working and saving. Visualize how many hours of your life it will take to make up the money if you lose.
From now on, I will at least no longer bet on sports and other silly prop bets until I get a steady job. For the love of Christ, someone please give me a job!
I've just consistently gambled between 5% – 10% of my investable holdings on individual publicly traded and privately held stocks for more than 20 years in a row. It's going to be really hard to stop. But with your help, I just might.
If you encounter someone with a gambling addiction who wants to make a bet with you, the best thing you can do is decline their offer. Even if they taunt you for being afraid or whatever, do not bet with them.
Thoughts On Tesla
As for Tesla stock, like a true gambling addict, I'm just going to hold onto my position until it blows up or turns into a massive home run. It's like the guy at the roulette table who gets lucky betting on black five times in a row and never takes any winnings off the table. He just wants one more double before he's done for good. But of course, red eventually hits and he ends up losing everything.
Clearly, Tesla stock is priced to perfection. Any execution missteps or earnings misses will cause the stock to tumble. The shares have run far ahead of fundamentals. Analysts will be downgrading the stock. Heck, the stock could easily correct 10%-30% on any given day given how quickly the share price has risen.
Below is a chart comparing Bitcoin’s 2017 rise to Tesla’s current rise. Scary stuff.
But unlike in 2000, when I was just a poor analyst who stumbled across an even luckier bet in VCSY, I no longer have to sell anything to live due to our current passive income streams. Having enough passive income is true freedom.
In 10 years, there is a chance that Tesla extends its electric vehicle lead, lowers production costs, builds an autonomous global transportation network, becomes a power conglomerate, creates new efficient modes of transportation, turns into the next Amazon, and also becomes highly profitable. Just in case Tesla does reach all these goals, I don't want to miss the electric bus.
Therefore, I'm hoping Tesla corrects back down to the $500 – $600 range so I can buy more. If not, I'm just going to hold onto my 150 measly shares and see what Elon has in store for the world. I enjoy betting, err I mean investing, in entrepreneurs who are always looking into the future.
Despite Tesla's performance, I got to admit, losing $800 and then losing the Super Bowl still really hurt. It's time to make back my losses one laborious hour at a time.
Pay Attention To Your Money
One way to help kick your gambling habit is to diligently track your wealth. This way, you are aware of your bankroll and can also more viscerally feel the pain of losing money. Each dollar you lose is one less dollar you have for your retirement.
Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
Note: I gamble with my father for steak dinners because it is one of my ways of bonding with him. Even if I lose, I feel like I'm winning because I get to treat him to one of his favorite foods. But this is also probably the addict in me talking.
Gambling Hotline: 1800-522-4700. If you have a gambling problem, talk to someone and seek professional help.