It's a perennial story: Someone of apparently meager means dies and leaves an enormous estate. Then, after the initial surprise, he or she is lionized as a genius investor.
"You think Warren Buffett, you know, that guy, was good at this sort of thing," said the lawyer for one of these closet millionaires, in a typical remark. "She ran rings around Warren Buffett."
But this oft-told tale leaves out something important, according to a recent look at several of these sometimes colorful characters. Extreme penny pinching, it turns out, often played as large a role in their wealth as did savvy stock picking.
Millionaire wanna-bes should consider, for example, Theodore and Harvey Baker, brothers from the Wisconsin dairy town of Chilton who died in 1989 and 1994, respectively.
Nothing in the history of the brothers spoke of great wealth. Their parents removed them from school around the eighth grade to work on the family farm. Harvey, the older brother, took care of Ted, who was mentally disabled.
By the late 1950s, after their father had died, they moved into town and sold the farm, perhaps for as much as $50,000. They both took unskilled factory jobs and continued to live together, with Harvey doing the investing.
How did unskilled workers amass estates worth $2-million (Ted) and $4-million (Harvey)? Great frugality, say some people who knew them.
"From doing their tax returns," said Bill Engler Jr., their former lawyer, "I learned that it's not what you take in, it's what you spend." Or rather, what you do not spend. The Baker brothers did not turn on lights at night, Engler said. They cooked in bacon grease. For years they had no car _ they walked everywhere _ and they probably didn't have a television.
The Baker brothers seemed single-minded about saving. At the Calumet Homestead nursing home, where they moved in the early 1980s, the business manager sometimes helped Harvey as he paid bills.
Harvey "wouldn't buy a stamp before he had to and mailed everything at the last minute," said Nancy Steinke, the administrator. "If he could get me to give him a 32-cent stamp, that was a successful day for him."
And Alice Early, a stockbroker with Miller, Johnson & Kuehn, recalled one of her lunches with Harvey: "When we passed the Hardee's, he asked if I ate there. He said that he didn't because it was more expensive than McDonald's."
Still, watching pennies doesn't make one wealthy. But the extremely frugal are in tune with two tasks that are central to gaining riches: regular saving and regular investing over a lifetime.
For investors, "The risk is not week to week; it's not having invested," said John Markese, president of the American Association of Individual Investors in Chicago. "You can't beat starting that very, very early and adding through all environments and through time. Time works its magic."
The magic is strong. Ibbotson Associates, a research firm in Chicago, calculates that if someone put just $200 into the Standard & Poor's 500-stock index in March of this year, and just $25 a month thereafter, the investor would have nearly $27,000 by 2016, assuming an aggressive annual rate of return of 12.5 percent.
The penny pincher is also more inclined to follow a long-term "buy and hold" investment strategy _ a tactic many experts recommend. Someone accustomed to doing without is less likely to follow price changes compulsively, or to sell stocks often, said Gordon Gould, a retirement consultant with Towers Perrin in Los Angeles.
Take Anne Scheiber, the woman who was admiringly compared to Buffett. She was a former IRS auditor who made headlines when she died last year at 101 with an estate worth $22-million. Scheiber almost never sold a stock and had held some shares for more than 50 years _ since 1944, when she opened a Merrill Lynch account with $5,000.
Of course, one trait typical of supersavers can make their frugality much easier: few financial obligations. Neither Scheiber nor the Baker brothers, for instance, were married or had dependents.
And then there is Oseola McCarty, 87, a Mississippi washerwoman who has a $150,000 bank account. Also single, she inherited her paid-up family home and used to get much of her clothing and food from her customers.
Nevertheless, the instinct to save is powerful among these people, whatever their expenses. McCarty began saving at the age of 8, "as soon as I was big enough to stand up to a washtub," she recalled. And no one in her houseful of female relatives, who allowed her to keep a little of the money she brought in, instructed her to save it. That instinct, she said, "was born in me." Before she discovered banks, she stashed her money in a doll buggy.
Indeed, McCarty and those like her are often materialism's dropouts. "If you're not exposed to the consumer culture," said Paul Laughlin, a vice president of the Trustmark National Bank in Hattiesburg, Miss., "you're not driven by it."
The bank is the trustee for McCarty, who did not subscribe to a newspaper or own a television set until the bank bought her one.
Similarly, Scheiber wore the same black hat, coat and beret year-round, walked everywhere and lived in a rent-stabilized apartment with old furniture.
And Olive Swindells, a Maryland woman who died last year with a $4.4-million portfolio, lived frugally in a modest home covered in vines. "She didn't have to buy drapes because she grew her own," joked Ann Hoeppner, a financial planner with Blankinship & Foster in Del Mar, Calif.
Of course, these masked millionaires are not strangers to the ways of investing. Harvey Baker knew the closing stock prices every day, and both Scheiber and Swindells were avid students of the market.
The eccentric stubbornness common to such people sometimes makes them excellent researchers, who "follow their own sense of what they believe, not brokers," said Percy Bolton, a financial planner in Los Angeles.
And they are capable of great generosity. The Baker brothers devoted their combined $6-million estate to scholarships for students from their area who attend the University of Wisconsin.
Scheiber left her $22-million to Yeshiva University; McCarty has created a $150,000 trust for students at the University of Southern Mississippi in Hattiesburg, and Swindells gave $4.4-million to Gallaudet University, a school for the deaf.
But when it comes to wealth-gathering, frugality is perhaps their brightest guiding light. Just ask Stephanie Bullock, 19, the initial recipient of McCarty's generosity toward the Mississippi school.
"One of the first things she said when I met her was she wanted me to save," Bullock said.
Still, even the most fiercely frugal may succumb to the urge to buy. Preparing for a trip to New York last winter, McCarty went to a store that rents fur coats. When the clerk refused her service, she whipped out the cash and bought a full-length mink. How much did she pay? "I don't want to tell," she said with a giggle.