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Have you ever had to pass on the opportunity of a lifetime because you couldn’t afford it? Missing out on opportunities can not only lead to regret but also slow your progress toward achieving your financial goals.

But just like you can save an emergency fund to prepare for unexpected hardships, you can save in an “opportunity fund” to prepare for your lucky break. That’s the advice of Jim Wang, founder of Wallet Hacks and originator of the idea of an opportunity fund.

We talked to Wang to find out what exactly an opportunity fund is and how to decide if it should be part of your financial plan.

How this entrepreneur decided he needed to save for opportunities

A successful entrepreneur, Wang often met and networked with other people who had just started a business.

“I’d occasionally meet folks looking to raise small sums of money – a few thousand dollars here or there,” Wang said. He was interested in investing in these entrepreneurs’ efforts but didn’t always have funds available. “It’s a lot to come up with in a short period of time,” he said.

That’s when Wang decided he needed savings specifically earmarked for such can’t-miss opportunities. “I started keeping a little extra money set aside in case I saw a deal that looked especially appealing,” he said. And so, his opportunity fund was born.

Since then, Wang has turned his own experience into a smart savings strategy, advising everyone to consider building their own such fund. By his definition, “an opportunity fund is like an emergency fund, but instead of protecting against emergencies, it’s used for taking advantage of opportunities.”

“Whether it’s an investment or just a big sale on something you might (need) in the near future, an opportunity fund helps you get involved without putting your financial plan at risk,” he said.

Three steps to starting an opportunity fund

An opportunity fund is a smart idea in theory, and having cash set aside and ready to go can have big payoffs. But not everyone is in the best financial situation to start working on this savings goal right away.

Here’s how to decide if you need an opportunity fund and how to start saving if you do.

1. Weigh an opportunity fund against other money goals

“You need to have all of your other financial priorities in place” before you start an opportunity fund, Wang said. The money goals to put first include:

  • Paying all living expenses and bills on time.
  • Fully funding your emergency savings.
  • Making sufficient contributions to retirement accounts.
  • Paying down high-interest debt.
  • Planning and saving for major purchases, including a car, a home or a child’s college education.

If you still have work to do on any of these top priorities, you should start there. “It’s OK to miss an opportunity; it’s not OK to miss specific goals and needs,” Wang said.

Those fortunate enough to have made progress on the financial goals above, however, might be trying to decide what to work on next. If that’s you, Wang said, “you could put (your money) in an opportunity fund rather than put more into unallocated savings.”

Now read: How to future-proof your finances

2. Set an opportunity fund target

The next step is to figure out how big you want your opportunity fund to be. That could depend on how you plan to use your fund and how much you can afford to save.

“I take my typical investment size and cut it in half” to get an opportunity fund target, Wang said. “If you are comfortable putting £1,000 into a single stock, then the opportunity fund could be £500-£1,000.”

You also can get started by earmarking a small amount, perhaps £100-£200, as your opportunity fund. Then you can keep adding to the fund until you decide to use it or until it’s the size you want.

3. Decide where and how to deposit your opportunity fund

As you start an opportunity fund, you might wonder where to keep it. Wang said he keeps his opportunity fund in a high-interest savings account until he reaches his target.

Then, “I move it into a longer-term investment like the stock market, perhaps an index fund,” Wang said. “I don’t want more than my typical investment size in that fund because it’ll go to waste.” In fact, there are many low-cost funds to park your money with until another investment opportunity comes along.

When should you use your opportunity fund?

Here are the three best ways to use your opportunity fund, according to Wang:

  • Buy something you already planned to purchase at a steep discount. By having an opportunity fund ready, you can take advantage of a big sale on a pricey major appliance. Or you could buy those high-end speakers listed for a steal on Gumtree. “It sounds counterintuitive, but you’re immediately saving money and getting something you need in the process,” Wang said.
  • Take advantage of once-in-a-lifetime experiences and opportunities. You might be offered concert tickets at a steep discount, for instance, or come across a dirt-cheap travel package to a locale you’ve always wanted to visit. For Wang, one of the most memorable uses of his opportunity fund was taking advantage of the chance to see U2 live in Dublin at the last minute.
  • Buy into “an investment opportunity you have fully vetted and want to get involved in,” Wang said. That was his initial intent with his opportunity fund: using it to invest in new businesses he believed in. By having your own opportunity fund, you’ll be ready to buy into the next smart investment at a worthwhile price.

As you start building an opportunity fund, you can think about what’s important to you and what kinds of opportunities appeal to you most.

“Having an opportunity fund, sitting there earning some interest while you wait, is a great way to take advantage of those opportunities,” Wang said. So don’t be afraid to use these savings when you come across the chance of a lifetime.