Introduction To The Financial Fence®

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Information about Introduction To The Financial Fence®
Finance

Published on December 22, 2008

Author: WealthDiscoveryChannel

Source: slideshare.net

Description

This is an introduction to a simple analogy for understanding how money works and includes a worked example

© Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® A New Way of Thinking Way of Thinking © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® A New Way of Thinking Introduction to the Key Colours Sky Blue Represents Income : “The Sky is the limit” Orange Represents Expenses : “Proceed with Caution” Green Represents Capital : “The Garden where I grow things” Red Represents Debt : “Danger, use with extreme caution” Dark Blue Represents Equity : “Accumulated wealth” © Copyright The Financial Fence Pty Ltd 2006

The Financial Freedom Equation YOUR TIME INCOME EXPENSES Investment Income SURPLUS PERSONAL INVESTMENT CAPITAL DEBT REDUCTION CAPITAL © Copyright The Financial Fence Pty Ltd 2006

Return or Accumulation? – River or Reservoir Accumulation Mindset says : “Reservoirs are great because I have value around me and Rivers can run out.” Return mindset says “Reservoirs don’t create any flow, they just sit there and give you nothing; what I need is flow.” © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® - Example BALANCE SHEET “AS AT” PERSONAL Video One CAPITAL $316,000 Introducing the concept that INVESTMENT CAPITAL Capital must equal Debt + Equity $63,000 i.e. $316,000 + $63,000 =$379,000 DEBT $111,500 + $267,500 = $379,000 $111,500 EQUITY $267,500 © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® - Example Video Two Showing how a person’s activity works. PERSONAL INVESTMENT EXPENSES INTEREST NET INCOME INCOME INCOME $51,000 $180 -$37,000 -$7,800 $6,380 NET INCOME CHANGE IN CHANGE IN NET CASH FLOW +/- to Debt PERSONAL CAPITAL INVESTMENT CAPITAL +/- to Debt -$6,380 $5,500 $5,000 $4,120 © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® - Example BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® PERSONAL NET INCOME STATEMENT PERSONAL CAPITAL “FOR THE PERIOD” CAPITAL $316,000 $321,500 INVESTMENT INVESTMENT CAPITAL CASH FLOW STATEMENT CAPITAL “FOR THE PERIOD” $63,000 CHANGE IN $68,000 PERSONAL CAPITAL DEBT $5,500 DEBT $111,500 $115,620 EQUITY Video 3 EQUITY $267,500 Bringing it all together $273,880 © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® - Example BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® PERSONAL NET INCOME STATEMENT PERSONAL CAPITAL “FOR THE PERIOD” CAPITAL $316,000 $321,500 INVESTMENT INVESTMENT CAPITAL CASH FLOW STATEMENT CAPITAL “FOR THE PERIOD” $63,000 CHANGE IN $68,000 INVESTMENT CAPITAL DEBT $5,000 DEBT $111,500 $115,620 EQUITY Video 3 EQUITY $267,500 Bringing it all together $273,880 © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® - Example BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® PERSONAL NET INCOME STATEMENT PERSONAL CAPITAL “FOR THE PERIOD” CAPITAL $316,000 $321,500 INVESTMENT INVESTMENT CAPITAL CASH FLOW STATEMENT CAPITAL “FOR THE PERIOD” $63,000 NET CASH FLOW $68,000 +/- to Debt DEBT $4,120 DEBT $111,500 $115,620 EQUITY Video 3 EQUITY $267,500 Bringing it all together $273,880 © Copyright The Financial Fence Pty Ltd 2006

The Financial Fence® - Example BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® PERSONAL NET INCOME STATEMENT PERSONAL CAPITAL “FOR THE PERIOD” CAPITAL $316,000 NET $321,500 INCOME $6,380 INVESTMENT INVESTMENT CAPITAL CASH FLOW STATEMENT CAPITAL “FOR THE PERIOD” $63,000 $68,000 DEBT DEBT $111,500 $115,620 EQUITY Video 3 EQUITY $267,500 Bringing it all together © Copyright The Financial Fence Pty Ltd 2006 $273,880

The Financial Fence® - Example BALANCE SHEET BALANCE SHEET “AS AT” “AS AT” THE FINANCIAL FENCE ® PERSONAL NET INCOME STATEMENT PERSONAL CAPITAL “FOR THE PERIOD” CAPITAL $316,000 PERSONAL INVESTMENT EXPENSES INTEREST NET $321,500 INCOME INCOME INCOME $51,000 $180 -$37,000 -$7,800 $6,380 INVESTMENT INVESTMENT CAPITAL CASH FLOW STATEMENT CAPITAL “FOR THE PERIOD” $63,000 NET INCOME CHANGE IN CHANGE IN NET CASH FLOW $68,000 +/- to Debt PERSONAL CAPITAL INVESTMENT CAPITAL +/- to Debt DEBT -$6,380 $5,500 $5,000 $4,120 DEBT $111,500 $115,620 A complete picture showing EQUITY where you were, what you did, EQUITY $267,500 $273,880 and where you ended up! © Copyright The Financial Fence Pty Ltd 2006

Contact us Email: service@onesherpa.com www.thefinancialfence.com www.onesherpa.com © Copyright The Financial Fence Pty Ltd 2006

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