Laura Rowley Money & Happiness

In the Jan. 8 issue of The New Yorker, writer Malcolm Gladwell examines the Enron collapse in a story called "Open Secrets." He suggests that much of the company's risky dealing was out in the open, and investors could have uncovered it had they analyzed it correctly.

A Matter of Semantics -- and Debate

Gladwell uses the Enron case to draw a distinction between a puzzle and a mystery. A puzzle involves a buried secret, and we can solve it once we've collected all the relevant pieces -- such as in the Watergate scandal.

Washington Post reporters Bob Woodward and Carl Bernstein broke the story of the Nixon administration's dirty dealings once they uncovered all the information with the help of their inside source, Deep Throat (former FBI official W. Mark Felt).

In contrast, a mystery is when we have the relevant facts but have to figure out how to interpret them. Gladwell gives an example from World War II, when Allied intelligence had to analyze hours of Nazi broadcasts to figure out if a "super weapon" they described was real and, if so, where it was being developed.

Gladwell's New Yorker piece set off a spirited debate in the press, with Joe Nocera of the New York Times enumerating ways that Enron had indeed withheld essential information about its financial condition.

Nocera argues that this was no mystery that could have been resolved by taking readily accessible pieces and applying the right analysis, insight, and perspective. Instead, it was a puzzle -- something that couldn't have been solved because Jeffrey Skilling and other Enron execs hid the pieces.

Net Worth Number-Crunching

The puzzle/mystery distinction is an intriguing one when applied to money management. Some people think achieving wealth is a mystery. It's requires a certain type of person, a special kind of insight, or an analytical expertise with numbers to make it happen. So they don't approach it with confidence.

Consider a startling statistic from "The Net Worth Workout" by New York financial planner Susan Feitelberg: The average U.S. citizen works 44 years and retires with a net worth of $46,000, excluding home equity.

That represents $1,000 a year for every year in the workforce, or $83 a month. If the worker invested the $1,000 in the S&P 500 for 44 years, at age 65 they would have more than $650,000.

The Missing Pieces

I'm convinced that wealth is a mainly a puzzle to solve -- a fact-finding mission that demands each person assemble the missing pieces for himself. It doesn't require a Midas touch, or the extraordinary insight of Warren Buffet (although admittedly, that doesn't hurt). It requires basic information, discipline, and patience.

Here are 13 pieces to help solve the wealth puzzle:

1. Get as much education as you can.

   Someone with a bachelor's degree earns about a million dollars more over a lifetime than someone with a high school education, according to the U.S. Census Bureau.
   

2. When you get a job offer, come prepared to negotiate for a higher wage.

   Workers who fail to negotiate a first salary stand to lose more than $500,000 by age 60, according to Linda Babcock and Sara Laschever, authors of "Women Don't Ask: Negotiation and the Gender Divide."
   

3. Always spend less than you earn.

   Save at least 10 percent of your gross income every year.
   

4. Establish very specific written financial goals.

   Put a time frame and price tag on them, set up a monthly budget, and track your spending so it reflects your goals.
   

5. Resist advertising and the media.

   If they greatly influence you to desire a certain kind of clothing, car, vacation, home decor, high-tech toys, etc., get rid of your television, and don't buy magazines that glorify luxury products and services.
   

6. Never, ever carry a balance from month to month on any credit card.
   
   
7. As soon as you have an income (no matter your age), open a free checking account and an interest-bearing online savings account.

   As soon as you begin receiving regular paychecks, have the online savings account automatically withdraw money from your checking account month after month.
   

8. Establish an emergency fund.

   Save enough in your online savings account for an emergency fund equal to at least three months of your living expenses.
   

9. Once you've saved $3,000 above your emergency fund goal, begin investing for your written financial goals.

   If the goal is more than five years away, buy an index mutual fund that mimics the performance of the broader stock market, such as Vanguard Total Stock Market Index Fund (VTSMX). Have the financial firm transfer the same amount of money automatically from your checking into this account every month.
   

10. Once your assets grow to $10,000, begin to diversify your investments into other low-cost mutual funds.

    Base these on your goals, time frame, and appetite for risk. To learn more, go to Morningstar's online Learning Center. You can get investment basics here for free, and move on to higher courses for a minimal fee.
    

11. Get your employer to help with retirement.

    If your employer offers a retirement plan such as a 401(k), max out your contribution or contribute at least enough to get any employer match. Allocate your contributions among the mutual funds offered or invest in a single target-strategy fund or life-cycle fund. Visit 401khelpcenter.com for more information.
    

12. Buy real estate.

    Homeowners enjoy significantly higher net worth than renters who earn the same income, according to the Federal Reserve's Survey of Consumer Finances. Among people earning $50,000 to $79,999, for example, homeowners had a net worth of roughly $195,000, compared to $25,000 for renters.

    (One caveat: Your mortgage, real estate taxes, and homeowners insurance should add up to no more than one-third of your gross income.)
    

13. Protect yourself and the people you love.

    At a minimum, take out a catastrophic health insurance policy. If you have children, buy a cost-effective 20-year term life insurance policy worth 7 to 10 times your annual salary. Also draw up a will; for more information, see Nolo.

Start Solving the Puzzle Early

Admittedly, there are details to each piece of the wealth puzzle that require ongoing education. And there are pieces people can't control.

Some people have the good luck to be born into a well-off family that pays for college, or hit it off with the boss and find themselves mentored into a high-paying job. Others may suffer a catastrophic illness or have the misfortune of devoting an entire career to Enron. We can try to manage these pieces, but we can't control them the way we can, say, shop at a discount store to cut the grocery bill, or choose a mutual fund with low costs.

But there's a lot we can control if we act on the information we have. Unfortunately, some people ignore essential information that's readily available until there's an emergency; sometimes, by that point it's too late. The earlier you start assembling the puzzle pieces, the better.

With luck, latecomers to the game can still locate the pieces and assemble them into a cohesive financial picture. But the picture will likely be more robust, and fall more easily into place, if you start looking for the puzzle pieces earlier in life.

Help assemble the pieces of the wealth puzzle for your fellow Yahoo! Finance readers. What's your favorite source of information about building wealth? What are the best tools, techniques, or tips you've found to live below your means and save money? Email your best money-saving techniques it to me at laurarowley.column@yahoo.com and I'll include the top tips in upcoming columns.