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© 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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Introduction To The Financial Fence®

  • 1. © Copyright The Financial Fence Pty Ltd 2006
  • 2. The Financial Fence® A New Way of Thinking Way of Thinking © Copyright The Financial Fence Pty Ltd 2006
  • 3. 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
  • 4. The Financial Freedom Equation YOUR TIME INCOME EXPENSES Investment Income SURPLUS PERSONAL INVESTMENT CAPITAL DEBT REDUCTION CAPITAL © Copyright The Financial Fence Pty Ltd 2006
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. 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
  • 13. Contact us Email: service@onesherpa.com www.thefinancialfence.com www.onesherpa.com © Copyright The Financial Fence Pty Ltd 2006