I have always thought of my parents as pretty frugal. Growing up, they made me save a certain percentage of my allowance. They taught me to always pay off a credit card in full every month. They didn't waste money on designer clothes or huge TVs. They bought only used cars, with cash.
So when I recently sat down to talk to them about their retirement plans, I got a big shock. The first question I asked was what their yearly expenses are, since that determines how much money they will need. My mom's response?
"I don't know."
I stared at her in total shock! How is that even possible? My mom manages the family's finances. She keeps track of bills and pays them on time. The vast majority of expenses are made through checks, credit cards or bank transfers--all easily trackable. I tried again.
"Well, how much do you guys spend each month?"
"Everything your dad makes," she replies.
WTF? This isn't even true, since I know they save money in their IRAs. I pointed this out and I guess she is including IRA contributions in the spending. I tried to encourage her to keep track of expenses, told her about Mint, but she just "didn't want to think about it."
They are also now spending $20K on landscaping. Admittedly this is not actually a waste of money--it will add to the value of the house and the new landscaping plan will save water. But they will only get that money back when they actually sell the house. I have no idea where they are getting the money for the landscaping from.
I am still totally astonished as I write this. I always thought of my parents as so responsible! The only saving grace is that at least they don't spend more than my dad makes. Based on the rough numbers she gave me, between my dad's pension, SS, the soon-to-be-paid-off house and yearly max IRA contributions they will be OK by traditional retirement age--IF they keep expenses to a reasonable level. But how can they keep expenses to a reasonable level if they don't know how much they spend??? Not to mention my dad has health problems. I am very concerned about what will happen if he is unable to work.