The Soapbox 3! - The Benefits of Having an Opportunity Fund

It was J.R.R. Tolkien who believed in what he called the “eucatastrophe.” An “eucatastrophe” was simply the opposite of a catastrophe. So instead of everything going wrong all at once, everything suddenly went right; the forces of nature conspired, the planets aligned, take your pick of whatever metaphor you like.

It’s no secret that many Americans are in trouble financially. A lot of people are simply in debt over their heads and have no idea how to get out. It’s funny, but the principles to maintain sound money aren’t that difficult to understand, and yet so many people have trouble with them simply because “their eyes are too big for their stomachs,” as my mother would say at Thanksgiving dinner. Quite simply, we live in a predominantly consumer culture. You see, at Thanksgiving dinner, you have all that food set before you on the table. You help yourself to some cranberry sauce, some stuffing, some mashed potatoes, some turkey, and so on until you feel like you need to vomit. Like Thanksgiving day dinner, nearly anything we want these days is set before us, lined up at endless strip malls and halls of consumerism. Plasma TV’s, ipods, luxury Cars, new clothes, the list goes on.

So instead of prospering (by living within one’s means), many folks decide to go into debt instead, simply to satiate their consumer appetite or to keep up appearances. Obviously, this is unsustainable. But this is not new news. It goes back to that same simple principle of living within one’s means.

But what happens once you’ve done everything you can and are living in your means? You’ve even created a nice emergency fund for yourself, in case anything catastrophic comes along.

Are you prepared for when the eucatastrophe strikes?

Think about it for a moment. Are you prepared to seize an opportunity when it comes by? Without dipping into your savings? If you prepare for the worst with an emergency fund, why not prepare for the best as well with an opportunity fund?

It makes sense, no? With an opportunity fund set aside, you no longer have to indiscriminately dip into your savings when something good comes along. Now, it’s important to note that your opportunity fund should be used for investments and assets, not just to satisfy impulse purchases. To borrow Robert Kiyosaki’s definition, an asset puts money into your pocket, a liability takes money out. The goal here is to be able to make a purchase, have it not impact your savings, and have that purchase increase your cash flow, or ability to generate income for yourself.

In the meantime, while you are waiting, what should you do with all that money? The goal is to not lose the money in the meantime, so high-yield savings accounts are probably your best and safest bet until you are ready to seize whatever opportunity you are presented with. And if worst comes to worst, you’ll end up draining your opportunity fund with an unwise purchase, instead of your savings. But fortune favors the prepared, so decide for yourself what the best plan of action is.

Inspired by Bargaineering