Start an ‘opportunity fund’ for goals that will bring you happiness, experts say. Here’s why

When it comes to saving and investing, many investors tend to think of two key goals — funding emergencies that could crop up in the short term or retirement that may be years away.

But as many individuals continue to reconsider their goals following the Covid-19 pandemic, experts say that that thinking is changing. And that’s prompting a need for investors to place a new priority on funding nearer-term goals, say financial planners who work with them.

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

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“Covid kind of changed the way a lot of us think about the way we want to live, where we want to live, what opportunities might come — career, life, you name it,” said Brent Weiss, a certified financial planner and head of financial wellness at Facet, a registered investment advisor firm based in Baltimore.

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

Those goals may include starting a company, going back to school or switching jobs or careers, Weiss said. Or it may include big-ticket vacations or experiences.

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

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

“What is the life you want to live?” Weiss said he asks them.

Carolyn McClanahan, a CFP and founder of Life Planning Partners in Jacksonville, Florida, said she gives a talk titled, “Are you happy now?”

“When you make that mindset of maximizing the clients’ life now, 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 can they change careers, she said.

The savings then becomes all about furthering those transitions alongside short-term and long-term goals.

“By focusing on planning for now, it makes the client more resilient for whatever the future throws their way,” McClanahan said.

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

Start by getting clear on what you want to achieve and when, Weiss advised. From there, start to identify what kind of contributions you may need to help achieve your goals.

“Money is just a tool to help you achieve success, however you define it,” Weiss said.

The time horizon you identify for what you want to achieve should help guide where you save or invest the money to pay for those items on your to-do list.

That may include creating a separate strategy for three- to five-year goals apart from emergency or retirement funds, which may include high-yield savings accounts or bonds, Weiss said.

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

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

Regardless of your financial goal, making progress can sometimes feel like an uphill battle. That makes it important to regularly celebrate small wins, Weiss said.

For example, if you have credit card debt and put all of your free cash flow toward paying those balances down, it will feel very much like a diet.

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

Instead, if you allocate a certain amount of funds to ways to celebrate your progress — say by buying dinner out after paying down a credit card balance — you will still be able to enjoy your money while working toward your goals.

“Your mindset matters,” Weiss said. “If we focus only on the money part of life, and we forget about our mindset and our psychology, we’re never going to start creating the change or success that we want to see.”