Use an opportunity fund to save for goals that make you happy

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When saving and investing, many investors tend to think of two main goals: funding emergencies that might arise in the short term or retirement, which might still be years away.

But as many people continue to rethink their goals in the wake of the Covid-19 pandemic, experts say that mindset is changing. And that’s forcing investors to give new priority to funding shorter-term goals, say financial planners who work with them.

Enter the “opportunity fund,” as some experts call it.

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“Covid has changed the way many of us think about how we want to live, where we want to live, what opportunities are available — career, life, whatever,” said Brent Weiss, certified financial planner and financial leader Wellbeing at Facet, a registered investment advisory firm based in Baltimore.

“Now we’re starting to have people say, ‘I don’t know if I want to put all my money into this retirement fund for 30 years from today; Maybe in three or five years I want to do something different,'” Weiss said.

Those goals could include starting a business, returning to school or changing jobs or careers, Weiss said. Or it may involve expensive vacations or experiences.

“What life do you want to lead?”

Identifying such opportunity fund targets can be a financial wake-up call.

Weiss said he typically begins meetings by asking clients what is most important to them and what they want to do, particularly in the next three to five years.

“What life do you want to lead?” Weiss said he asked her.

Carolyn McClanahan, CFP and founder of Life Planning Partners in Jacksonville, Florida, said she was giving a talk titled “Are You Happy Now?”

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“If you now adopt the mindset of maximizing customers’ lives, it really changes the conversation,” said McClanahan, who is also a member of the CNBC FA Council.

For example, instead of focusing on retirement planning with someone who hates their job, more immediate questions should be asked, such as what can be changed to make the position more likeable or whether they can make a career change, she said.

Savings are then all about driving these transitions alongside short- and long-term goals.

“By focusing on planning for the moment, it makes the client more resilient for whatever the future throws at them,” McClanahan said.

To find ways to build an opportunity fund that will improve your life, three tips may help.

1. Treat money as a tool

First, be clear about what you want to achieve and when, advises Weiss. From there, start figuring out what kind of contributions you might need to achieve your goals.

“Money is just a tool that helps you achieve success, no matter how you define it,” Weiss said.

2. Match your investments to your goals

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The time horizon you set for what you want to accomplish should help you figure out where to save or invest the money to pay for the items on your to-do list.

That could include developing a separate strategy for three- to five-year goals alongside emergency or retirement funds, which could also include high-yield savings accounts or bonds, Weiss said.

However, McClanahan said it can be OK to keep liquid assets together for emergencies or short-term life goals.

For goals that are less than five years away, “there’s no reason to invest them in the stock market,” she said.

3. Celebrate small successes

No matter your financial goal, making progress can sometimes feel like an uphill battle. That’s why it’s important to regularly celebrate small successes, said Weiss.

For example, if you have credit card debt and are using all of your free cash flow to pay off that balance, it will feel like a diet.

“It’s going to be emotionally draining,” Weiss said. “You will probably relapse in three months and go back to your old habits.”

Instead, devoting a certain amount to celebrating your progress—for example, buying dinner out after paying off a credit card balance—will allow you to still enjoy your money as you work toward your goals.

“Your mindset is important,” Weiss said. “If we only focus on the money part of life and forget about our mindset and our psychology, we will never create the change or success we desire.” Use an opportunity fund to save for goals that make you happy

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