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Systematic Framework For The Creation Of Wealth
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Systematic Framework For The Creation Of Wealth

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Many people are quite ad hoc and haphazard in their wealth creation. Take a look at a very systematic yet simple way to go about being more successful in your finances

Many people are quite ad hoc and haphazard in their wealth creation. Take a look at a very systematic yet simple way to go about being more successful in your finances

Published in: Economy & Finance, Business

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  • 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