There is so much talk on the internet in the world of personal finance (PF) about having an Emergency Fund. I agree that an Emergency Fund is important; you want to make sure that you have enough cash to take care of a stolen laptop, or your AC going out in the middle of summer. There is a lot of focus on building this up quickly; most PF writers say that this is more important than paying down debt, which I also agree.
But my opinion, another important thing to create is what I call an Opportunity Fund. This is a fund of special money that you keep aside for in case a really good opportunity comes up. Opportunities come up much more than Emergencies, so this is the fund that I focused on first. I felt that this fund was critical to future success so I used many of the tactics that people like Dave Ramsey suggest when you are building your Emergency Fund. Such tactics include Selling Something, and cutting back on expenses, especially those recurring ones that most people don’t really notice, then finding extra income opportunities.
Most PF writers suggest ways with no investment to work hard and make extra income but with an opportunity fund helping out you can supercharge this and quickly pay down debt, build all of your funds up, and if you are doing really good you may even make a business out of your fund.
So I started building my fund about 5 years ago. We looked for people who needed to sell items quickly, to pay their bills or because they were moving, I stuck with electronics and computers because I knew the market and knew I could flip the items quickly. Most people who are selling things are not selling to get the most money, most people sell because they need quick money, or want the item gone. Almost every week I buy a laptop from a parent who took it away from their disobedient child as punishment for something the child did. Most of these parents have no urge to get the most for their money, they just want the item gone.
I only use the fund to buy things that I am fairly sure I can flip quickly. I don’t want to deplete the fund so I make sure I can turn the items over and get my original money back along with a nice profit. Time is money so the longer I think something will take to sell the lower % of my projected sales price I need to get. My general goal is to double my money in 30 days.
I often buy things that are on huge sales. I built up my fund the entire summer and early fall my first year because I knew I could take advantage of Black Friday, so when November hit I made sure I sold as much as I could and made this fund as large as I could, then I spent a few days looking over the ads, and I targeted the things that had the largest amount below normal prices. Anyone can get things for cheap online, so I made sure that I was buying at a price low enough that even if I sold online I could make a large profit. On black Friday most people look for things for their house, they buy and hold on to these items until they are worthless, so even if you buy at the lowest price you still lose money financially. So many people focus on the TV’s and such but the real money I have found is in the smaller items, the ones that there are no limits on. My first black Friday doing this I focused on External Hard Drives, that were selling for 40% of normal price, bought a whole cart of them. I found wireless mice for less than 30% of retail price, got over 100 of them, found 32 GB USB Drives for just $9.95 each, still a good buy today, a few years later. I also got laser printers for $39 each, 22” Monitors for $89 each and many other good buys that most of the people just did not see. (Quick Tip, I use the site ShopLocal to find the best sales on new items.) I then listed these items on craigslist for more than I paid, also called up people I knew and asked them if they wanted any of these, I offered to come over and set up the items and show them how to use it. I spent $3000 that y
ear, and less than 30 days later I had the $3000 back into my Opportunity fund, AND I still had about half of the stuff left! I now do this every year, it is crazy the good deals that these places put out on small items, most of these prices are less than the cost to make the item.
But the real, supercharged creation of money from my Opportunity fund came from used items. I know a lot about computers, so I offered to buy peoples headache computers off of them. I have focused on laptops, and I have purchased over 150 laptops each year for the last 5 years in a row from private sellers. By the time 2011 came about I was doing this so much, and needed more room and space that I opened a computer store. By that time I had built my fund up to over $10,000 along with $10,000 or so worth of computer parts. So I used it all to move into a store. I was able to get a very nice store on a shoestring budget, never stopping buying and selling. I then quickly moved into buying and selling much larger amounts of items. I depleted my fund to build the store but worked hard and smart to build it back up. I was putting all of the profits into building out the store, and getting extra inventory, it took a year to finally have in stock all that I wanted to have, then I started building up the fund quickly, once I had enough I quickly became free of consumer debt, for the first time in my adult life. I bought a car for my wife, bought a work truck for the business, then a new SUV for myself. I also have build up my opportunity fund again.
The Santa Fe, with my truck in the background.
When a good friend of mine came to me trying to sell some items he needed sold quickly to help him with a fine he needed to pay, I was there able to help. When others needed to borrow money, I was there to help. When a deal comes across for 300 monitors at crazy low prices I am able to jump on it. When a computer store goes out of business I have the funds to buy all their inventory for pennies on the dollar. When a banner making company wanted to sell their plotter I bought it, now I can make vinyl letters for people, expanding my business. When a school auction went up I bought 50 chairs and 100 tables, sold 60 tables on craigslist and more than paid for it all, now I have the rest to use and help organize the store.
I am able now, with the combination of a nice Opportunity fund, a large moving truck, a warehouse, staff, and a store to move $15,000-20,000 worth of stuff per month, with only about 40% going into what we buy stuff for, and 30% going into overhead, the other 30% goes into build up the business, giving money away, helping people and saving up to buy our building. And yes the business has an emergency fund equal to 3 months of expenses, and so does our household. We have just meet these goals in the last few months, this will allow us to start to really do good things and help people out.
So I have said all of this to show you how thinking different, and building up a fund to take advantage of Opportunity is so important. Do it in the area you know about, if you are an expert on cars, then buy and flip cars, if you know about guns, there is great money in that, if you know about antiques, I know people who made fortunes in that, real estate works also if you have enough money, if you don’t have enough you can always use other people’s money. In 2010 and 2011 I did some large deals, and my Opportunity fund was not large enough, I was not shy at all about borrowing the money, doing the deal and paying back the money. Doing this allows you to follow your passion, to earn money by doing something that you love to do, and of course you can do it as little or as much as you like. I am sure 80% of the people who read this would never turn it into a business, most people just aren’t wired for that. But maybe you can use this fund to get out of debt, or buy that house you wanted, or even to build one massive Emergency fund, which you can always borrow from when a really good opportunity comes along.