Opportunity Fund: What Is It and Why You Need One

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An opportunity fund is a type of emergency savings account. The fund helps you cover basic living expenses when you lose your job, your hours are reduced, or your sick, disabled, or hospitalized for a period of time. The fund covers your basic needs until you can find another job or income source.

It’s called an opportunity fund because you regain back the time you once spent at work to explore new job opportunities with less financial stress.

Often times, what tends to keep us from pursuing opportunities is the lack of time. It’s a way to turn an otherwise negative experience of losing a job into an opportunity to explore interests. Additionally, it can also be used for once in a lifetime business or investment opportunities.

What is an Opportunity Fund

With an opportunity fund, you’re not saving 6 months of income but rather 6 months of living expenses. Living expenses include housing, utilities, cell service, food, and transportation.

For example, your net monthly income is $2000 and your monthly living expenses are $1500. Your goal is to save $9,000, not $12,000. The smaller your basic living expenses are the lower the amount you’ll need in your fund.

How to start an Opportunity Fund

  1. Calculate your basic living expenses. You can do this with the help of the budgeting process.
  2. Open a savings account and name the account “My 6 Month Opportunity Fund $X” with X being the amount of your goal. So it would look like, “My 6 Month Opportunity Fund $9,000”.
  3. Set up automatic transfers into the account each pay period.
  4. Find clever ways to make extra cash for the account from side gigs or gift money, tax refunds, and bonuses.
  5. Replenish the fund every time it’s used.
  6. Review and revise your fund amounts. Your life and money situation will change and your fund should change too.

Can you have both an emergency fund and an opportunity fund? Absolutely. This is a matter of allocating your savings for various purposes. Or consider calling your emergency fund as the opportunity fund so you take away the negative connotation.

Since an opportunity fund is less often touch compared to rainy day funds, you can consider saving your money into certificates of deposits. With a CD ladder strategy, you can open higher-yielding certificates with different maturity dates. This helps with earning more while keeping portions of the fund liquid and maturing periodically. Additionally, you can use a higher-yielding cash management account with an online brokerage.

Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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