CORE AREA 2: GAP ANALYSIS (STEP 2 4)

4 Which ONE of the following best describes the extent to which you personally monitor your regular expenses?

I don't keep an eye on expenses at all I keep my eye on expenses a bit

Without keeping written records, I keep a fairly close eye on expenses

I use written records to keep a close eye on expenses

5%

In order to do the gap analysis, individuals have to convert their retirement goals into rands in order to determine their financial needs in terms of retirement by comparing it to their existing retirement provision and to calculate whether there is a shortfall.

Detail of question with options Missing

values (%) Comments

5 Do you have a household budget?

Yes / No 5.9%

In order to do this, individuals should be equipped with the necessary financial knowledge to be able to assess their financial position, making use of financial statements and budgets to be able to take stock of their current financial position. They should also be equipped with the necessary taxation knowledge to determine the levels of taxation that they would be exposed to when taking the different levels and sources of income into account within each of the retirement phases. The taxation expense could also influence the levels of retirement savings. Individuals’ financial position as well as their financial life cycle could also affect their financial ability to provide for their retirement.

The manner in which individuals deal with financial emergencies also influences their level of retirement savings and therefore stresses the importance of having an emergency fund to deal with these emergencies rather than delving into savings that are meant for retirement, hence the inclusion of question 32. Question 33 also dealt with this issue, but it was excluded due to the high level of missing values.

During this whole process, individuals should also take into account the influence that economic factors such as compound interest, inflation and time value of money could have on their retirement savings. Questions 98, 109, 112 were excluded due to their high level of missing values. Both questions 114 and 128 dealt with the concept of inflation and 25 Overall, thinking of your assets, debts and savings, how

satisfied are you with current personal financial condition? Extremely dissatisfied / Dissatisfied / Neither satisfied nor satisfied / Satisfied / Extremely satisfied

6.3%

30 In a typical month, how difficult is it for you to cover your expenses and pay all your bills?

Extremely easy / Easy / Neither easy nor difficult / Difficult / Extremely difficult

7.4%

32 Have you set aside emergency or rainy day funds that would cover your expenses for 3 months, in case of sickness, job loss, economic downturn, or other emergencies?

Yes / No

4.6%

33 If you lost your main source of income, for how long could you continue to cover your living expenses, without borrowing/moving house?

Less than a week

At least a week, but not one month At least one month, but not three months At least three months, but not six months More than six months

Detail of question with options Missing

values (%) Comments

65 And now can you tell me whether you currently hold any of these types of investment or savings products?

Unit trusts

Education policy or plan Investment or savings policy Shares on the stock exchange Retirement annuity

Provident fund Pension fund

Stokvel or umgalelo or savings club

Giving money to someone who will guard it for you, to keep it safe

Keep cash or savings at home Other savings club

None of above

3.5%

level of missing values in comparison to question 128, which had missing values of 9.2%, it was decided to use question 114 instead of question 128. The reason was that question 128 dealt with the influence of inflation on food prices only, whereas question 114 covered a greater spectrum by considering the impact that it has on living costs as opposed to food prices, which addresses only one of the components of living costs.

Bearing all of this in mind, questions 4, 5, 25, 30, 65,114, 116, 124 and 129 were included, as they addressed some of the factors that should be dealt with within this core area of the practical retirement planning process. All of these questions had low levels of missing values.

98 How much do you agree or disagree?: I’ve got a clear idea of the sort of financial products/services that I need

without consulting a financial adviser

Totally agree / Tend to agree / Tend to disagree / Totally disagree

21.7%

109 Now imagine that the brothers have to wait for one year to get their share of the R1,000. In one year’s time will they will be able to buy:

More with their share of the money than they could today

The same amount

Or, less than they could buy today It depends on inflation

It depends on the types of things that they want to buy

Detail of question with options Missing

values (%) Comments

112 And how much would be in the account at the end of five years

More than R110 / Exactly R110 / Less than R110

Or is it impossible to tell from the information given

32.4%

114 Do you think the following statement is true or false: High inflation means that the cost of living is increasing rapidly.

True / False

10.9%

116 How would you rate your level of financial knowledge on a scale of 1 to 5 where 1 is: Not at all knowledgeable, 5: Very knowledgeable

3.1%

124 To what extent do you agree :If you have savings, it is a good thing if interest rates go up

Strongly agree / Agree / Neither nor / Disagree / Strongly disagree

9.6%

128 To what extent do you agree: If inflation goes up, food prices will go up.

Strongly agree / Agree / Neither nor / Disagree / Strongly disagree

9.2%

129 To what extent do you agree: The more money you earn, the more tax you pay.

Strongly agree / Agree / Neither nor / Disagree / Strongly disagree

10.2%