It’s widely advised that every individual and every family have an emergency fund. It’s difficult to predict unexpected hardships, and preparing can mean the difference between ending up in debt or weathering the storm. But less publicized is the notion of an opportunity fund. An opportunity fund prepares you for unexpected circumstances, but it’s built to help you take advantage of positive ones rather than guard you against negative ones.
Financial advisors generally suggest that you have between three and twelve months of living expenses set aside for your emergency fund, and setting aside that cash should take a priority over an opportunity fund, but once you have that money squared away, the opportunity fund can ensure that you rarely if ever have to dip into it. But the terms for when and how you draw from your opportunity fund should be carefully established. Otherwise, it could just become a slush fund for your spending whims.
The uses for your opportunity fund should be tied to your personal dreams and ambitions. Perhaps that means investing in promising stocks when the opportunity arises, enrolling in school once more to make a change of careers, or setting aside time for a vacation to get your head straight and explore new options for your future. But it’s important to distinguish that the opportunity fund isn’t a vacation. All spending should be delegated towards circumstances that can feasibly improve your future and create better opportunities for you and your family.
Those touting the value of an opportunity fund distinguish between those who prescribe to an abundance mindset rather than those who prescribe to a scarcity mindset. The latter think solely in terms of the worst that can happen, and that instills a sense of self-fulfilling stasis. The risk of finding a new job or exploring new opportunities ensures that these individuals keep living simply within their means. Those who prescribe to an abundance mindset instead see excess money as a tool to leverage towards their futures. Unfortunately, there’s no simple metric to finding what level of wealth should be afforded to your opportunity fund. This requires building a close relationship with your financial advisor and finding the balance between saving for your retirement and spending money for your more immediate future.