It's More Than 'Just a Phase'

3/20/2025 - By Michael C. Hall, CFP®

The first phase of financial life is the Accumulation Phase. It is characterized by the initial increase in net worth. For most, this aligns with the early years of their career. The keys to a successful Accumulation Phase are prioritizing goals, maximizing savings, understanding where dollars should be saved, how and when to use credit, and managing risks. The following are some of the basics that should help you identify areas for focus as you begin to build your initial wealth.

Key Elements to Accumulation

1. Income Source

For most, this means getting a job in your chosen field. For others, this may be the launch of a business. It is common to find early entrepreneurs with full, or part-time, jobs that help support the business in its initial stages. But whether your income is 5 figures or 6 figures, how you manage expenses within that income will determine how quickly you arrive at a point of financial independence.

2. Budgeting & Healthy Financial Habits

The adage “It doesn’t matter how much money you make. It is how much money you keep” is important. Setting a regular savings goal should be a priority. And even if the amount seems small, simply developing the habit of saving money will serve you well. So, whether you are saving $5 or $5,000 each month, it’s the habit of saving that is key.

3. Where to Save, For What

Where you put the savings will matter more as time goes on. Tax-deferred accounts are optimal for retirement. Employer-sponsored retirement plans often have the added benefit of matching a portion of your contributions. For non-retirement assets that you plan to access prior to retirement, consider the timeline in which you may need these assets. If you have near-term goals like the purchase of a home or another important goal, then savings accounts or standard brokerage accounts may be the right choice. Work with a Financial Advisor to determine what type of accounts and investment vehicles are the most appropriate.

4. Credit Use

Deciding if, and when, to borrow money can have significant impacts on your long-term financial health. Borrowing wisely can provide benefits and allow savings dollars to grow at a higher rate than the rate at which you borrow. However, borrowing too much, for too long, or for purchases of depreciating assets, can create a significant disadvantage as the mounting debt and related interest charges mount up.

5. Protection and Risk Management

In the Accumulation Phase your most valuable asset is likely your ability to earn money. This is especially true for young professionals with high-income earning potential. And if you are the primary breadwinner in your household, this is something that needs to be protected. Work with a Financial Advisor to determine if a Long-Term Disability policy may be needed. Having a policy could ensure that long-term plans are not derailed by an unforeseen injury or illness that prevents you from working. Life Insurance may also be something to consider depending on your situation. Your advisor can help determine if Life Insurance would be appropriate for your situation and what type of policy is most economical.

Highly specific and detailed goals are not necessary for success in the accumulation phase. Simply establishing good habits of saving and putting capital in the right vehicles is a solid start. As you reach the second half of your accumulation phase you will want to focus on the details. A financial advisor can assist with a financial plan and make recommendations on the strategies and tactics that are most effective for your situation. With some planning and discipline, you can make the most of your hard work and opportunity. Keep an eye out for the next article in this series, the GROWTH PHASE!

By approaching your financial strategy with a clear and strategic mindset, you can ensure that your accumulation phase lays the groundwork for long-term stability and success. Prioritizing smart savings, thoughtful investments, and consistent progress toward your goals will set you up for a secure financial future. As always, feel free to reach out if you have any questions or would like to schedule an initial consultation.

About the Author | Michael C. Hall, CFP®

Michael is a director for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh, Cleaveland & Gund. With over 22 years of expertise in asset management and financial planning, he specializes in delivering comprehensive wealth management solutions that integrate asset management with tax planning and risk management. He works closely to ensure that each client’s financial goals are met with a comprehensive plan and strategies tailored to their unique risk tolerance, growth objectives, and overall financial well-being.