One decision early accumulator often face is whether to allocate their paycheck towards debt repayment or market investments.   If you have high-interest credit card or personal loan debt, it's wise to prioritize using most of your extra cash to pay off those debts.

The reason is that paying off debt provides a guaranteed return equal to your interest rate, while portfolio investments do not offer high guaranteed returns in the current market.   As a general rule, investors with debt carrying an interest rate of 5% or higher should prioritize paying down the loans or considering refinancing before fully diving into market investments.

One exception is to prioritize building an emergency fund, which will be discussed further below.

During your 20s and 30s, it's beneficial to invest in your own human capital by pursuing additional education or training to enhance your earning potential in the long run.

Not all investments in human capital guarantee returns, so it's advantageous if you can secure employer support in financing such endeavors.

Starting early with advanced degrees or additional training can significantly increase the lifetime return on your investment.

Young accumulators should prioritize protecting their limited financial capital and establishing an emergency fund to handle unexpected expenses.

To safeguard against significant financial hardships, it's important to prioritize insurance coverage for critical risks such as homeowner's or renter's insurance, auto insurance, and life insurance for those with dependent children. However, it may be unnecessary to purchase extended warranties for items like laptops or washing machines.

Check your superannuation fund's insurance offerings, as they often include life, total and permanent disability (TPD), and income protection insurance. Compare these options with what is available outside of super to ensure you have adequate coverage.

An emergency fund is crucial, providing a financial safety net that prevents reliance on unfavorable financing options like credit cards in case of job loss or unexpected expenses.

When building an emergency fund, keep in mind that it should cover three to six months' worth of essential living expenses, not your entire income. This approach makes the goal more attainable and less overwhelming.

Gig workers and contractors should prioritize building a larger savings cushion due to the irregularity of their income.

Early accumulators often overlook retirement savings for various reasons.

Many individuals in their 20s and 30s face financial challenges, with competing short-term goals like saving for homes, cars, weddings, and children, making retirement savings a lower priority.

Psychologically, young individuals starting their careers may struggle to prioritize saving for retirement due to the distant timeline and lack of immediate urgency. Despite potential challenges, young investors can still benefit greatly from the power of compounding over time, even with modest savings and average market returns.

Starting early and saving consistently pays off in the long run. For example, a 22-year-old saving $200 monthly with a 5% annual return will have over $362,000 by age 65. In contrast, someone starting at 35 and saving $300 monthly with a 6% annual return will have a little over $300,000 by age 65.

The power of compounding in the early years outweighs higher returns and contributions later on. Starting early, even with small amounts, is crucial to maximize the benefits of retirement savings and make up for lost time.

Employers in Australia are required to contribute at least 10.5% of your earnings into your super account, known as the super guarantee. However, it's important not to set it and forget it. Taking a few hours to compare your super options can significantly impact your future retirement, as explained by Morningstar's Annika Bradley.

"You are never too young to start; in fact, the younger the better," she says.

"The key factors in retirement planning are the number of years until retirement, the amount you can save and invest during those years, and the investment returns you can achieve."

Investors should consider their risk tolerance, taking into account how they would react to a 5% or 10% portfolio loss in a short period. This is important to avoid making impulsive decisions that could disrupt their long-term investment strategy.

But the crucial concept is risk capacity, which refers to how much you can afford to lose without needing to alter your lifestyle or financial plan.

It's crucial to align and balance your risk tolerance and risk capacity to ensure they are in harmony with each other. Early career accumulators have a high-risk capacity for retirement savings due to the long-time horizon before they will need to access their funds.

Retirement portfolios often have significant stock investments because, despite their volatility compared to safer options like bonds and cash, stocks historically offer higher long-term returns than other assets.

The Morningstar Lifetime Allocation Indexes and target-date mutual funds typically hold around 90% in stocks and allocate the remaining portion to bonds and cash, reflecting the rationale behind the higher potential returns of stocks in long-term investment strategies.

For shorter-term goals like a home deposit, it is generally advisable to avoid or limit investments in stocks, focusing instead on more conservative options

While bonds and cash offer lower returns, they also come with lower volatility. For near-term goals, it is recommended to allocate the majority of your funds to safer, lower-returning assets, with a small portion allocated to stocks for potential growth.

Resist the urge to complicate or narrow your investments with thousands of individual stocks, managed funds, or ETFs. Keep it simple and broad.

Focus on low-cost, diversified investments.

Use index funds or ETFs for a well-diversified portfolio without relying on a portfolio manager.  Index funds track market segments like the S&P 500 or S&P/ASX 200, offering low costs and long-term advantages over actively managed funds.