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A SYSTEMATIC FRAMEWORK
FOR THE CREATION OF WEALTH
          © Copyright The Financial Fence Pty Ltd 2005
The Truth Is:


One of the biggest issues facing the western
     world is lack of financial literacy.




                  © Copyright The Financial Fence Pty Ltd 2005
As a Result…


•We have developed a mentality of instant
 gratification
•Buy Now, Pay Later
•Many people have become dependant
 on credit to satisfy their wants
                  © Copyright The Financial Fence Pty Ltd 2005
This problem spans whole generations
          Everywhere you look you can find people
          struggling to pay the bills




                  © Copyright The Financial Fence Pty Ltd 2005
How can you overcome this?


    The Financial Fence® System
    was created to help you achieve
    FINANCIAL FREEDOM, Step by Step
         © Copyright The Financial Fence Pty Ltd 2005
INTRODUCTION TO THE FINANCIAL
          FENCE®

           © Copyright The Financial Fence Pty Ltd 2005
The Financial Fence®
A New Way of Thinking
                 Way of Thinking




                 © Copyright The Financial Fence Pty Ltd 2005
Why we use a fence?
1. Fences are made of two parts :
   A. Posts that anchor the fence into the ground at a point AND
   B. Rails that carry the fence over a distance.
2. Fences incorporate Milestones (Posts) and Activity (Rails) in the same
   analogy.
3. Financial statements have these two parts :
   A. “Milestones” - Balance Sheet.
   B. “Activity” – Income Statement & Cash Flow
   Statement.
4. Fences provide a boundary and security.

                           © Copyright The Financial Fence Pty Ltd 2005
The standard two rail fence



M                                                         M
I                                                         I
           ACTIVITY
L                                                         L
E                                                         E
S                                                         S
           ACTIVITY
T                                                         T
O                                                         O
N                                                         N
E                                                         E
           © Copyright The Financial Fence Pty Ltd 2005
The standard two rail fence


                                                      C
                                                      A
                                                      P
  CONSUMPTION RAIL                                    I
                                                      T
                                                      A
                                                      L
  ACCUMULATION RAIL                                   F
                                                      U
                                                      N
                                                      D
                                                      I
                                                      N
                                                      G
       © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®

        THE FINANCIAL POST (MILESTONE)

        Personal Capital
•
         – Family Home, Cars, Boats, Furniture.


        Investment Capital
•
        – Capital which produces income such as Rental property,
        shares, superannuation or a business.




                          © Copyright The Financial Fence Pty Ltd 2005
The standard two rail fence


                                                      PERSONAL
                                                       CAPITAL




                                                      INVESTMENT
                                                        CAPITAL




       © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®

        THE FINANCIAL POST (MILESTONE)

        Net Debt
•
        – all items of an interest bearing nature
        such as mortgages, home equity loans, bank overdraft,
        lease & hire purchase outstanding, credit cards and cash.


        Equity
•
        – the difference between total capital and
        debt which is a person’s net accumulated wealth.

                          © Copyright The Financial Fence Pty Ltd 2005
The standard two rail fence


                                                      PERSONAL
                                                       CAPITAL




                                                      INVESTMENT
                                                        CAPITAL




                                                        DEBT




                                                        EQUITY

       © Copyright The Financial Fence Pty Ltd 2005
The standard two rail fence


                                                      PERSONAL
                                                       CAPITAL




                                                      INVESTMENT
                                                        CAPITAL




                                                        DEBT




                                                        EQUITY

       © Copyright The Financial Fence Pty Ltd 2005
The Financial Freedom Equation

YOUR
                              INCOME
TIME


                                                                        Investment
                          EXPENSES
                                                                          Income

                           SURPLUS
 PERSONAL                                                              INVESTMENT
  CAPITAL                                                                CAPITAL
                        © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®
        THE TOP FINANCIAL RAIL (ACTIVITY)

        Personal Income
•
        – Income gained from exchanging your personal time for
        money. e.g. wages and salary.



        Investment Income
•
        – Income gained from your Investment Capital. e.g. Profits
        on a business, rental on property, dividends on shares.


                          © Copyright The Financial Fence Pty Ltd 2005
Consumption Rail
           Income


Personal       Investment
 Income          Income




                       © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®
        THE TOP FINANCIAL RAIL (ACTIVITY)

        Expenses
•
        – all items of cost that have no residual financial
        value. e.g. food, clothing, travel costs, tax.

        Interest
•
        – the cost of debt from the financial post usually
        charged on a percentage basis.




                          © Copyright The Financial Fence Pty Ltd 2005
Consumption Rail
Income   minus Expenses



                                Expenses                  Interest




           © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®
        THE TOP FINANCIAL RAIL (ACTIVITY)

        Net Income
•
        – Total income minus expenses minus interest.




                          © Copyright The Financial Fence Pty Ltd 2005
Consumption Rail
                                 Net
Income   minus Expenses equals
                               Income




           © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®
    THE BOTTOM FINANCIAL RAIL (ACTIVITY)


     Net Income
•
    – This is carried forward from the end of the top financial rail.




                            © Copyright The Financial Fence Pty Ltd 2005
Net
                                                         Income
         Accumulation Rail
  Net
Income




          © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®
    THE BOTTOM FINANCIAL RAIL (ACTIVITY)
    Accumulation of Personal Capital
•
    – Positive or negative movements of personal capital items. For an item
    to be capital it must have some residual financial value at the end of a
    period.
    e.g. Renovations to the Family Home, Buying or selling of Motor
    Vehicles.


    Accumulation of Investment Capital
•
    – Positive or negative movements of investment capital items.
     e.g. investing in a business, buying a rental property, buying or selling
    shares.
                            © Copyright The Financial Fence Pty Ltd 2005
Accumulation Rail
  Net                Accumulation of
         plus
Income                   Capital


     Accumulation of                        Accumulation of
        Personal                              Investment
         Capital                                Capital
            © Copyright The Financial Fence Pty Ltd 2005
Definitions of terms used in The Financial Fence®
    THE BOTTOM FINANCIAL RAIL (ACTIVITY)

    Net Cash Flow
•
    – Net Income +/- accumulation in personal capital +/- accumulation
    in investment capital.




                          © Copyright The Financial Fence Pty Ltd 2005
Accumulation Rail
  Net                                      Net Cash
                    Accumulation of
         plus                       equals
Income                  Capital             Flow




                © Copyright The Financial Fence Pty Ltd 2005
THE FINANCIAL FENCE ®

PERSONAL
                          Consumption Rail                                   PERSONAL
 CAPITAL                                                                      CAPITAL

                                                            Net
             Income                       Expenses equals
                        minus
                                                          Income
INVESTMENT                                                                   INVESTMENT
                          Accumulation Rail
  CAPITAL                                                                      CAPITAL

               Net                                       Net Cash
                                  Accumulation of
                       plus                       equals
             Income                   Capital             Flow
  DEBT                                                                         DEBT




  EQUITY                                                                       EQUITY

                              © Copyright The Financial Fence Pty Ltd 2005
The Financial Freedom Equation

YOUR
                              INCOME
TIME


                          EXPENSES

                           SURPLUS
 PERSONAL                                                              INVESTMENT
  CAPITAL                                                                CAPITAL
                        © Copyright The Financial Fence Pty Ltd 2005
How The Financial Fence® locks together
BALANCE SHEET                                                                                       BALANCE SHEET
   “AS AT”                                                                                             “AS AT”
                            THE FINANCIAL FENCE ®
                                      NET INCOME STATEMENT
 PERSONAL                                                                                            PERSONAL
                                        “FOR THE PERIOD”
  CAPITAL                                                                                             CAPITAL
                             INVEST
                PERSONAL                                                                  NET
                                          EXPENSES           INTEREST
                              MENT
                 INCOME                                                                 INCOME
                            INCOME

                                      CASH FLOW STATEMENT
INVESTMENT                                                                                          INVESTMENT
                                        “FOR THE PERIOD”
  CAPITAL                                                                                             CAPITAL
                                  CHANGE IN               CHANGE IN                           NET
                     NET
                                  PERSONAL               INVESTMENT                          CASH
                   INCOME
                                   CAPITAL                 CAPITAL                           FLOW
   DEBT                                                                                                 DEBT



                 CONTROL CHECKS
   EQUITY                                                                                              EQUITY
                 1. TOTAL CAPITAL = DEBT + EQUITY
                                              © Copyright The Financial Fence Pty Ltd 2005
How The Financial Fence® locks together
BALANCE SHEET                                                                                       BALANCE SHEET
   “AS AT”                                                                                             “AS AT”
                            THE FINANCIAL FENCE ®
                                      NET INCOME STATEMENT
 PERSONAL                                                                                            PERSONAL
                                        “FOR THE PERIOD”
  CAPITAL                                                                                             CAPITAL
                             INVEST
                PERSONAL                                                                  NET
                                          EXPENSES           INTEREST
                              MENT
                 INCOME                                                                 INCOME
                            INCOME

                                      CASH FLOW STATEMENT
INVESTMENT                                                                                          INVESTMENT
                                        “FOR THE PERIOD”
  CAPITAL                                                                                             CAPITAL
                                 CHANGE IN                CHANGE IN                           NET
                     NET
                                 PERSONAL                INVESTMENT                          CASH
                   INCOME
                                  CAPITAL                  CAPITAL                           FLOW
   DEBT                                                                                                 DEBT



                CONTROL CHECKS
   EQUITY                                                                                              EQUITY
                1. TOTAL CAPITAL = DEBT + EQUITY
                2. OPENING EQUITY + NET INCOME = CLOSING EQUITY
                                              © Copyright The Financial Fence Pty Ltd 2005
How The Financial Fence® locks together
BALANCE SHEET                                                                               BALANCE SHEET
   “AS AT”                                                                                     “AS AT”
                             THE FINANCIAL FENCE ®
                                          NET INCOME STATEMENT
 PERSONAL                                                                                    PERSONAL
                                            “FOR THE PERIOD”
  CAPITAL                                                                                     CAPITAL
                                 INVEST
                PERSONAL                                                           NET
                                              EXPENSES        INTEREST
                                  MENT
                 INCOME                                                          INCOME
                                INCOME

                                          CASH FLOW STATEMENT
INVESTMENT                                                                                  INVESTMENT
                                            “FOR THE PERIOD”
  CAPITAL                                                                                     CAPITAL
                                       CHANGE IN            CHANGE IN                 NET
                     NET
                                       PERSONAL            INVESTMENT                CASH
                   INCOME
                                        CAPITAL              CAPITAL                 FLOW
   DEBT                                                                                         DEBT



                CONTROL CHECKS
   EQUITY                                                                                      EQUITY
                1. TOTAL CAPITAL = DEBT + EQUITY
                2. OPENING EQUITY + NET INCOME = CLOSING EQUITY
                3. OPENING DEBT + NET CASH FLOW = The Financial Fence Pty Ltd 2005
                                            © Copyright CLOSING DEBT
Benefits of a systematic framework
The Financial Fence® helps you to:
•Make decisions in context
•Make better decisions which leads to better financial
results
•See how all the pieces of your financial world fit
together
•See that not all payments are equal
•See how you can use leverage to work for you rather
than against you.      © Copyright The Financial Fence Pty Ltd 2005
Contact us
Email: service@onesherpa.com
  www.thefinancialfence.com
     www.onesherpa.com
                     © Copyright The Financial Fence Pty Ltd 2005

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Systematic Framework For The Creation Of Wealth

  • 1. A SYSTEMATIC FRAMEWORK FOR THE CREATION OF WEALTH © Copyright The Financial Fence Pty Ltd 2005
  • 2. The Truth Is: One of the biggest issues facing the western world is lack of financial literacy. © Copyright The Financial Fence Pty Ltd 2005
  • 3. As a Result… •We have developed a mentality of instant gratification •Buy Now, Pay Later •Many people have become dependant on credit to satisfy their wants © Copyright The Financial Fence Pty Ltd 2005
  • 4. This problem spans whole generations Everywhere you look you can find people struggling to pay the bills © Copyright The Financial Fence Pty Ltd 2005
  • 5. How can you overcome this? The Financial Fence® System was created to help you achieve FINANCIAL FREEDOM, Step by Step © Copyright The Financial Fence Pty Ltd 2005
  • 6. INTRODUCTION TO THE FINANCIAL FENCE® © Copyright The Financial Fence Pty Ltd 2005
  • 7. The Financial Fence® A New Way of Thinking Way of Thinking © Copyright The Financial Fence Pty Ltd 2005
  • 8. Why we use a fence? 1. Fences are made of two parts : A. Posts that anchor the fence into the ground at a point AND B. Rails that carry the fence over a distance. 2. Fences incorporate Milestones (Posts) and Activity (Rails) in the same analogy. 3. Financial statements have these two parts : A. “Milestones” - Balance Sheet. B. “Activity” – Income Statement & Cash Flow Statement. 4. Fences provide a boundary and security. © Copyright The Financial Fence Pty Ltd 2005
  • 9. The standard two rail fence M M I I ACTIVITY L L E E S S ACTIVITY T T O O N N E E © Copyright The Financial Fence Pty Ltd 2005
  • 10. The standard two rail fence C A P CONSUMPTION RAIL I T A L ACCUMULATION RAIL F U N D I N G © Copyright The Financial Fence Pty Ltd 2005
  • 11. Definitions of terms used in The Financial Fence® THE FINANCIAL POST (MILESTONE) Personal Capital • – Family Home, Cars, Boats, Furniture. Investment Capital • – Capital which produces income such as Rental property, shares, superannuation or a business. © Copyright The Financial Fence Pty Ltd 2005
  • 12. The standard two rail fence PERSONAL CAPITAL INVESTMENT CAPITAL © Copyright The Financial Fence Pty Ltd 2005
  • 13. Definitions of terms used in The Financial Fence® THE FINANCIAL POST (MILESTONE) Net Debt • – all items of an interest bearing nature such as mortgages, home equity loans, bank overdraft, lease & hire purchase outstanding, credit cards and cash. Equity • – the difference between total capital and debt which is a person’s net accumulated wealth. © Copyright The Financial Fence Pty Ltd 2005
  • 14. The standard two rail fence PERSONAL CAPITAL INVESTMENT CAPITAL DEBT EQUITY © Copyright The Financial Fence Pty Ltd 2005
  • 15. The standard two rail fence PERSONAL CAPITAL INVESTMENT CAPITAL DEBT EQUITY © Copyright The Financial Fence Pty Ltd 2005
  • 16. The Financial Freedom Equation YOUR INCOME TIME Investment EXPENSES Income SURPLUS PERSONAL INVESTMENT CAPITAL CAPITAL © Copyright The Financial Fence Pty Ltd 2005
  • 17. Definitions of terms used in The Financial Fence® THE TOP FINANCIAL RAIL (ACTIVITY) Personal Income • – Income gained from exchanging your personal time for money. e.g. wages and salary. Investment Income • – Income gained from your Investment Capital. e.g. Profits on a business, rental on property, dividends on shares. © Copyright The Financial Fence Pty Ltd 2005
  • 18. Consumption Rail Income Personal Investment Income Income © Copyright The Financial Fence Pty Ltd 2005
  • 19. Definitions of terms used in The Financial Fence® THE TOP FINANCIAL RAIL (ACTIVITY) Expenses • – all items of cost that have no residual financial value. e.g. food, clothing, travel costs, tax. Interest • – the cost of debt from the financial post usually charged on a percentage basis. © Copyright The Financial Fence Pty Ltd 2005
  • 20. Consumption Rail Income minus Expenses Expenses Interest © Copyright The Financial Fence Pty Ltd 2005
  • 21. Definitions of terms used in The Financial Fence® THE TOP FINANCIAL RAIL (ACTIVITY) Net Income • – Total income minus expenses minus interest. © Copyright The Financial Fence Pty Ltd 2005
  • 22. Consumption Rail Net Income minus Expenses equals Income © Copyright The Financial Fence Pty Ltd 2005
  • 23. Definitions of terms used in The Financial Fence® THE BOTTOM FINANCIAL RAIL (ACTIVITY) Net Income • – This is carried forward from the end of the top financial rail. © Copyright The Financial Fence Pty Ltd 2005
  • 24. Net Income Accumulation Rail Net Income © Copyright The Financial Fence Pty Ltd 2005
  • 25. Definitions of terms used in The Financial Fence® THE BOTTOM FINANCIAL RAIL (ACTIVITY) Accumulation of Personal Capital • – Positive or negative movements of personal capital items. For an item to be capital it must have some residual financial value at the end of a period. e.g. Renovations to the Family Home, Buying or selling of Motor Vehicles. Accumulation of Investment Capital • – Positive or negative movements of investment capital items. e.g. investing in a business, buying a rental property, buying or selling shares. © Copyright The Financial Fence Pty Ltd 2005
  • 26. Accumulation Rail Net Accumulation of plus Income Capital Accumulation of Accumulation of Personal Investment Capital Capital © Copyright The Financial Fence Pty Ltd 2005
  • 27. Definitions of terms used in The Financial Fence® THE BOTTOM FINANCIAL RAIL (ACTIVITY) Net Cash Flow • – Net Income +/- accumulation in personal capital +/- accumulation in investment capital. © Copyright The Financial Fence Pty Ltd 2005
  • 28. Accumulation Rail Net Net Cash Accumulation of plus equals Income Capital Flow © Copyright The Financial Fence Pty Ltd 2005
  • 29. THE FINANCIAL FENCE ® PERSONAL Consumption Rail PERSONAL CAPITAL CAPITAL Net Income Expenses equals minus Income INVESTMENT INVESTMENT Accumulation Rail CAPITAL CAPITAL Net Net Cash Accumulation of plus equals Income Capital Flow DEBT DEBT EQUITY EQUITY © Copyright The Financial Fence Pty Ltd 2005
  • 30. The Financial Freedom Equation YOUR INCOME TIME EXPENSES SURPLUS PERSONAL INVESTMENT CAPITAL CAPITAL © Copyright The Financial Fence Pty Ltd 2005
  • 31. How The Financial Fence® locks together BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® NET INCOME STATEMENT PERSONAL PERSONAL “FOR THE PERIOD” CAPITAL CAPITAL INVEST PERSONAL NET EXPENSES INTEREST MENT INCOME INCOME INCOME CASH FLOW STATEMENT INVESTMENT INVESTMENT “FOR THE PERIOD” CAPITAL CAPITAL CHANGE IN CHANGE IN NET NET PERSONAL INVESTMENT CASH INCOME CAPITAL CAPITAL FLOW DEBT DEBT CONTROL CHECKS EQUITY EQUITY 1. TOTAL CAPITAL = DEBT + EQUITY © Copyright The Financial Fence Pty Ltd 2005
  • 32. How The Financial Fence® locks together BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® NET INCOME STATEMENT PERSONAL PERSONAL “FOR THE PERIOD” CAPITAL CAPITAL INVEST PERSONAL NET EXPENSES INTEREST MENT INCOME INCOME INCOME CASH FLOW STATEMENT INVESTMENT INVESTMENT “FOR THE PERIOD” CAPITAL CAPITAL CHANGE IN CHANGE IN NET NET PERSONAL INVESTMENT CASH INCOME CAPITAL CAPITAL FLOW DEBT DEBT CONTROL CHECKS EQUITY EQUITY 1. TOTAL CAPITAL = DEBT + EQUITY 2. OPENING EQUITY + NET INCOME = CLOSING EQUITY © Copyright The Financial Fence Pty Ltd 2005
  • 33. How The Financial Fence® locks together BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® NET INCOME STATEMENT PERSONAL PERSONAL “FOR THE PERIOD” CAPITAL CAPITAL INVEST PERSONAL NET EXPENSES INTEREST MENT INCOME INCOME INCOME CASH FLOW STATEMENT INVESTMENT INVESTMENT “FOR THE PERIOD” CAPITAL CAPITAL CHANGE IN CHANGE IN NET NET PERSONAL INVESTMENT CASH INCOME CAPITAL CAPITAL FLOW DEBT DEBT CONTROL CHECKS EQUITY EQUITY 1. TOTAL CAPITAL = DEBT + EQUITY 2. OPENING EQUITY + NET INCOME = CLOSING EQUITY 3. OPENING DEBT + NET CASH FLOW = The Financial Fence Pty Ltd 2005 © Copyright CLOSING DEBT
  • 34. Benefits of a systematic framework The Financial Fence® helps you to: •Make decisions in context •Make better decisions which leads to better financial results •See how all the pieces of your financial world fit together •See that not all payments are equal •See how you can use leverage to work for you rather than against you. © Copyright The Financial Fence Pty Ltd 2005
  • 35. Contact us Email: service@onesherpa.com www.thefinancialfence.com www.onesherpa.com © Copyright The Financial Fence Pty Ltd 2005