Wednesday, May 25, 2005

Looking forward with The Financial Fence®

I woke up this morning wondering why it is that people don't want to know about their personal finances, particularly when they are not going as well as they would like. Getting people excited about using The Financial Fence® has been a struggle except when it comes to looking forward. Finding out what things are going to look like in a few months or years from now. This is what gets people excited. We all like to think about things being better in the future. Its just that sometimes we don't know how to build a decent picture of that. We don't know how to get a forward picture of our financial future. If we could get it easily then we would want it more than anything else because it would give us the confidence to plan and have peace of mind.

http://www.wheresthemoneygone.com/about.html

Tuesday, May 24, 2005

Why can’t I understand the financial numbers?

Money and finance topics have often been presented in a boring and uninteresting way yet they affect almost every one in society. So if this topic is so important why have more people not found the answer to understanding how it all works? One of the major reasons is that money and the stewardship of finance has been the domain of a profession which has a way of looking at things which is not easily understood and those who work in it have had no compelling incentive to communicate with those outside it. Most people don’t go to an accountant because they want to. They go because they HAVE TOO! When it comes to choosing members for a management team most managers choose to have an accountant because they want someone to ‘look after the finances’ and the accountant is often more focused on making sure things are controlled rather than communicating with the rest of management how the numbers work with the strategic running of the business. In the business community financial communication is often not clearly understood outside the finance function and I have found that there is a high level of frustration in understanding financial statements by non accounting executives. Financial numbers are often learned ‘by rote’ rather than having a feeling of how they ‘go together.’ The effect of this is that people can answer questions from their superiors but have very little ability to make use of the answers in the daily hustle and bustle of their working life. Many executives have knowledge of the profit and loss account; fewer have knowledge of the cash flow statement and balance sheet. But how do they all work together? When I ask people this question I have on occasions been met with the question; Do they?? The prime reason for this is that in traditional reporting the statements are shown separately and no one has shown people how they work together. To make sense of the financial statements it is important to understand how they work with one another and therefore it is easiest to view them all together on one page. This is why I invented The Financial Fence® as a way for people to see visually how simple it is to view everything in the right context. So why use a fence?? People see fences every day and I felt that people needed an analogy which they would see around them on a daily basis. Combined with this a fence can also show a picture of all the financial statements working together because:-

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 also have these two parts :
A. “Milestones” - Balance Sheet.
B. “Activity” – Profit & Loss Account & Cash Flow Statement.

So by using this simple analogy people can see the BIG picture of a business which is often lost in the accounting detail. Understanding the BIG picture helps executives keep the right perspective in reviewing the numbers of an organisation which means they can make better faster decisions.

http://www.financialperception.com

Monday, May 23, 2005

Using The Financial Fence® for Strategy

Strategy – Easy to prepare…Hard to implement I have often wondered why it is that many strategic documents sound really great and can be well founded yet in the end are never implemented quite in the way that was first envisaged. So why is this? Have you heard of the term expedient? Any one who has been involved in corporate life or in business life generally will know that there are times either in a month or at a particular time of year when certain things just have to be done. A good example of this would be getting the budget profit for a month OR making sure that you did not exceed the bank overdraft limit. During these times the last thing on your mind is implementing the strategy of the company. It’s simply to get a particular thing done irrespective of what the future holds. This is what I would call expedient behaviour. It’s behaviour which is for the here and now! Must do behaviour. So why is it that expedient behaviour ever happens in the first place? Surely if strategic plans were implemented in the way they were supposed to, there would not be the need for any expedient behaviour. However I’m sure you are aware that forecasting and budgeting is never a perfect science and that there are circumstances that are outside a person’s control. No one can predict the future with absolute certainty which is why it can be quite difficult to manage and run a company. Although I am aware of this, I think it is often a ‘cop out’ for a lack of understanding the financial implications of the strategic plan. How many numbers were there on the last strategic plan that you saw. I have seen some without any numbers at all which is absurd but many strategic plans have only the very high level numbers on them which have not always been rigorously checked in detail and integrated into a sound financial plan. Sometimes it can be as blatant as this: Get the accountant to work on some numbers which kind of support where you believe where you want to go and it will be OK. Unfortunately it is generally NOT OK. Think about this for a minute. Who on the management team of a company understands how ALL the numbers work? In my experience many management teams full understand the profit and Loss Account because often their performance bonuses are determined on the profit performance. Sometimes they also have a few working capital targets to achieve but very rarely does the entire team actually understand how the numbers work. They leave that up to the ‘numbers person’ on the management team. However, the so called ‘numbers person’ is often closeted in the numbers and does not fully appreciate the intricacies of the strategy and therefore is unable to always connect the numbers to the strategy. So what happens when things change? The numbers will always demand to be attended to. That’s the very reason why expedient behaviour exists! If at the very beginning most of the management team does not clearly understand how ALL the numbers work then when things change, as they inevitably do, people will take actions which may or may not support the strategy. In the end, if there is a major disconnect, the numbers and the strategy become entirely disconnected and the management team become entirely expedient and never implement their strategy. The best way around this is to use a tool that integrates both the strategy and the numbers. Also it must be understood by all the members of the management team. Without a doubt this tool is the Financial Fence®. It is a strategic BIG picture view of the financials of the whole company and is able to be understood by all.

http://www.wheresthemoneygone.com/about.html

Sunday, May 22, 2005

Is it more important to earn more income or have less expense?

"Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give." - William A. Ward Ever used the words ‘I can’t afford it’? This means that you are coming from a paradigm of having limited income and therefore not enough to go around. Why not use the words ‘How can I afford it’? This puts your focus on producing income rather than controlling expenses. At the end of the day releasing more income into the equation gives far more opportunities and I have found it is more enjoyable. So in my opinion the light blue squares on the top financial rail should receive more focus than the orange ones! "Don't be afraid your life will end; be afraid that it will never begin." - Grace Hansen

http://www.wheresthemoneygone.com/about.html

Saturday, May 21, 2005

INTRODUCTION TO THE FINANCIAL FENCE®

The Financial Fence® is a simple elegant way of visually setting financial goals and allowing you to understand what to do to achieve them. Imagine being able to confidently put in place the building blocks required to achieve financial wealth and prosperity before you went to a financial planner. If that makes you feel good imagine the added bonus of being able to monitor your progress along the way to financial success using exactly the same tool. Yes that’s right! The Financial Fence® is not only a brilliant planning tool; it is also a simple monitoring tool as well. You can plan and monitor which means you can confidently move towards financial success with guaranteed peace of mind. You will know exactly where you are on your financial journey. As situations change, you can upgrade your goals accordingly and then monitor your progress without having to refer to expensive professional advice. We all need professional advice along the way so when you do require the services of financial advisor, you will be in the driving seat with the ability to ask the questions rather than always being on the back foot and bamboozled by numbers and language you find difficult to grasp and fully understand. You will feel financially empowered and be able to speak to your friends and family and surprise them with your knowledge and confidence in dealing with both your family and business finances.

http://www.financialperception.com

Friday, May 20, 2005

Banks in $9bn card fee bonanza - theage.com.au

By Matt Wade and Duncan Hughes
May 20, 2005

The hidden cost of credit to ordinary customers has more than doubled.
The nation's banks last year earned more from credit cards than from housing loans, amassing a record $9 billion in fees from ordinary customers and businesses, a Reserve Bank report says.
The banks' fee income grew 4 per cent in 2004, or $327 million, underpinned by a 30 per cent surge in credit card fees, the bank revealed yesterday.
This growth was due entirely to fees that non-business customers paid - these fees rose 12 per cent to $3.44 billion.
Changes in the hidden interchange fees that banks and card companies charged on credit card transactions crimped fees collected from businesses by about $500 million a year.
These changes, which the Reserve Bank imposed late in 2003, reduced overall bank fees charged to businesses by 1 per cent to $5.56 billion.
But banks recouped some of this loss by lifting fees on credit cards, which jumped $180 million to $800 million.
AdvertisementFees from the big banks' credit cards have more than doubled since 2001 and have been growing at an average 29 per cent a year since 1998.
The average annual fee on a standard credit card was $38 in 2000. Last year it was $85, the report said.
Separate figures released yesterday showed overall credit card debt reached a record $30.27 billion in March, with the number of cards increasing to almost 12 million.
The average outstanding card debt was $2565.

http://www.wheresthemoneygone.com/home.html

The elements of The Financial Fence® - Part 3

In the last two days we have covered the first two elements of The Financial Fence® which were the financial posts and the top rail of the fence called the consumption rail. Today we're going to cover the bottom rail which for many people is the key to finding there way to financial freedom. It is called the ACCUMULATION rail. The reason why this rail is so important is that to be financially free you need to be in a position where money is working for you rather than you working for money. This is achieved by accumulating the right sort of capital. This is capital which can produce income. Basically there are two types of capital that we can accumulate in our lives. Personal Capital which some people call lifestyle capital. This generally produces more expenses for people. Then there is Investment Capital which generally produces income for people. So on the bottom rail of The Financial Fence® we start with any net income left over from the consumption rail ad deduct from that the cost of any capital that has been accumulated for the period. Think about it for a minute. Could the amount you have left over each week or month add up to buying a property for cash? Likely not and therefore to accumulate capital more quickly you can utilise the leverage capacity of debt. This is why at the end of the accumulation rail we add the activity up and this will show the increase or decrease in a person's debt. Remember, if you do not accumulate Investment Capital, you will never be able to produce investment income. If you don't produce investment income you will need to continue to sell your time for money to produce personal income. While you may require the use of debt to accumulate more investment capital, provided it is giving you a better rate of return than the cost of the debt, you will in time be working toward your financial freedom. Getting a bigger propoertion of your income as investment income rather than personal income is another measure of how far you are along the journey.

http://www.financialperception.com

Thursday, May 19, 2005

The elements of The Financial Fence® - Part 2

Yesterday we were talking about the financial post and that sometimes we can be fooled into thinking that what we see with our eyes is a good indication of what someone's wealth is all about. Remember people can be like a duck - Cool calm and collected on the surface and pedalling like hell underneath to keep up. If you get too much debt and not enough equity, then no matter how much capital you accumulate , life is going to be a struggle keeping up with the debt repayments. best to sell some of your capital and get back to a sensible ratio. Today I want to talk about the top rail of The Financial Fence® Just like a standard fence, The Financial Fence® has two rails. The rails of the fence represent the activity in a business and the posts represent the milestones or achievement points. The top rail we call the CONSUMPTION rail and there are a few reasons for this. It contains a person's income and expenses. It represents the reources that you have received and expended for a period. Another way of saying this is ; it shows you what you've got left after your activity and in this world of instant gratification, the challenge is to have something left at the end of your consumption rail. Think about it though; If you have nothing left at the end of your consumption rail, how will you ever begin to accumulate the capital that you require to become financially free. How will you ever get off the treadmill of working hard all the time and never having enough. Make a decision today that you will make sure you have something left at the end of your conumption rail so that you can begin the journey to financial freedom.

http://www.financialperception.com

Wednesday, May 18, 2005

The elements of The Financial Fence® - Part 1

One of the difficulties that I find is breaking down some of my complex thoughts into bite size pieces so people can understand what it is I'm on about. The Financial Fence® journey is now four years old and so often I forget that for some people this might be the first time that they have even heard of it. So over the next couple of days I've dcided to try and go back to basics and look at each of the elements of the fence and put it as simply as possible. We're going to cover the financial post, and each of the financial rails. The financial post is actually made up of two pieces: 1. Capital - this is made up of Personal Capital and Investment Capital 2. Funding - this is made up of Net Debt and Equity In life all we see is the capital. We never see the debt and equity. Think about it. You see someone driving down the road in a Ferrari. First thought - they must be doing well. Then you see someone driving down the road in a Commodore. First thought - they are doing about average. But let's say for instance the Ferrari has a capital value of $200,000 and the Commodore has a capital value of $40,000 And let's say the person driving the Ferrari has a loan on it of $180,000 and the person driving the Commodore owns it outright. So who is more wealthy? At a glance everyone would say the Ferrari owner but on more indepth investigation it is the Commodore owner. The Ferrari owner has Capital $200,000 debt of $180,000 and equity of $20,000 The Commodore owner has Capital of $40,000 debt of zero and equity of $40,000 So don't always look at what's visible. Look at how ALL the pieces are working and remember the formulas for the financial post Capital = Debt + Equity

http://www.financialperception.com

Monday, May 16, 2005

The 7 benefits of using The Financial Fence®

The Financial Fence® is unique because it is a strategic planning, budgeting and reporting tool which shows exactly what happens to your hard earned income and what you are doing about building your financial wealth. It shows a picture of how ALL the pieces of your financial puzzle fit together. Using The Financial Fence® will give you the following benefits:
1. Help you plan your financial goals
2. Help you monitor your own progress towards them
3. Give you a dynamic environment where you can alter your plans as situations change without having to enlist expensive professional advice.
4. Help you make the most of the income you have NOW.
5. Empower you with confidence when dealing with your own financial situation.
6. Avoid financial disaster by allowing you to know EXACTLY where you are on your financial journey.
7. Gives you peace of mind and prevents the stress caused by worrying if you are making it financially or if you might run out of money.

http://www.wheresthemoneygone.com/home.html

Sunday, May 15, 2005

Setting Financial Goals

Many people who I come across would love to set financial goals but have no real idea how to go about it. They then think that if they ask someone to do it for them then that will be OK. The problem with this is that if you have no idea of HOW the person is developing the goals or HOW to get to them it is simply a great intellectual exercise. When it comes to finance nothing ever works out exactly the way we think it is going to. A sure bet is impossible to find on an ongoing and sustainable basis. You might do it once or twice but in the end you are going to need to have a method that can deal with dynamic changes to your finiancial goals. How many times have you heard of someone asking their financial planner whether the plan that was developed for them was a good one. What do you think the planner is going to say? Well I'm having an 'off day' today so I've developed you a substandard plan! You need to know how to question a financial planner so that when he or she makes a human error, which they all do from time to time, you are able to ask the right questions and get the right outcome for your particular circumstances. What you need is a tool that is easy for you to understand, allows you to forward plan your goals, and then to monitor how you are going to achieve them. This is what The Financial Fence® can and will do for you. It's a BIG picture of your total financial situation and web based so you can work with it from anywhere in the world. Imagine being able to work out the building blocks to a better financial future, being able to communicate this with your loved ones, and also being able to dynaically change it whenever you need to. Sound too good to be true? Well it's not. It is now available.

http://www.wheresthemoneygone.com/home.html

Friday, May 13, 2005

Why do people not care where their money has gone?

Today as I think about this question it seems to me that it is sometimes easier to live in denial than face the fact that you don't know much about money except how to spend it. And whenever you come to the realisation that you don't know about something it is easier to move away from the topic rather than face it and try to learn.
Learning can often be very painful. It is not easy to face difficult financial circumstances particularly if we feel as though our backs are up against the wall.
In my experience we never suddenly get our backs up against a wall. We gradually move towards the wall but continmue to stay in denial that we are even heading in that direction. Very much like a frog which you put in a cold container and then begin to heat up the water. The frog continues to stay in the water oblivious that its getter hotter at a very slow pace. The frog won't jump out and oin the end will be cooked alive. Contrast that with putting a frog in hot water. he will jump out straight away.
So what's the moral of this story??
Don't let circumstances and denial get you in a position of being jammed up against a wall. Face your financial circumstances early. Get yourself educated and financially literate so that you can appreciate were you are financially and then you can plan a much better future. Set some financial goals TODAY. Don't wait until tomorrow. Tonmorrow you will be one step closer to a wall that you may not see coming.

http://www.wheresthemoneygone.com/home.html

Thursday, May 12, 2005

The dream

I have a dream that one day people around the world will truly understand their personal and business finances and that they can have sustainable financial freedom.
Many people are trapped with a lack of education when it comes to money and have very little idea of how it works.
A common definition of insanity is ‘doing the same thing and expecting different results’ so when it comes to money we are all a little insane. We do the same thing week in week out, month in month out, and for some people year in year out. Always hoping that one day things will change and we’ll find financial freedom. BUT it just won’t happen that way.
The best way to start towards financial freedom is to get education. At least find out how the game of money works and then you can have an idea of ewhat's going on. If you are looking for help then come and visit us. An improvemtn in financial literacy is only one click away.

http://www.wheresthemoneygone.com/home.html

Wednesday, May 11, 2005

Which bank will raise its charges? theage.com.au

Which bank will raise its charges? - National - theage.com.au: "Which bank will raise its charges?
By Bridie Smith
Consumer affairs reporter
May 11, 2005

Hundreds of thousands of Commonwealth Bank customers will have to pay monthly account keeping fees when the threshold for fee-free accounts leaps from $20,000 to $50,000 at the end of next month.
From June 29, a monthly $5 account keeping fee - $60 a year - will apply to customers whose combined savings and loans balance falls below $50,000. Withdrawal fees ranging from $2 to $30 will also apply.
A spokesman for the Commonwealth Bank defended the changes yesterday, saying that the bank was responding to a more competitive deposit market.
'The cost of providing free facilities for customers is increasing significantly so the bank has made a decision to increase the threshold,' spokesman Steve Cookson said.
He said the Commonwealth Bank had the largest customer base in Australia for deposit accounts and that margins were being squeezed.
The increase in the threshold comes less than a week after the bank boosted charges on selected internet transactions. From July 1, Commonwealth Netbank customers will be allowed only three free, third-party or schedule payments a month before the fees kick in. Extra payments will cost 50c each.
Australian Consumers Association spokeswoman Lisa Tait said bank fees collected from households increased from $1.2 billion in 1997 to $3 billion in 2003.
She said consumers were increasingly being made to pay for inadequate services and it was unfair to expect customers to park their savings in low-performing accounts just to avoid monthly account fees.

http://www.wheresthemoneygone.com/home.html

Money - Good or bad?

There was a time when money did not exist in the world and maybe life would have been less stressful back then! I think it probably would have but it would have been travelling alot slower as well. The advent of money has allowed us to trade with one another on a far more frequent and convenient basis.
And that's the reason why money is something which can disappear in a flash. We all know that buying is done on emotion and not on logic. For example take the man that went into the fishing shop to buy a new reel. While in there he saw a rod on special, some new hooks that were the latest and greatest, a new fishing jacket that he had been looking for for ages. As he was driving home with all these wonderful purchases in the back of the car he began searching for the logical reason he was going to give his wife for why he had put all of these new bargains on his credit card.
You see that if something is easy to buy then emotion can destroy all your logic in a split second and you will end up making purchases that you want and don't actually need.
By making money available for people they will tend to spend it. Think about this yourself. How much of each paypacket do you have left when you receive your next one. Normally not a lot and for those of you who are real spendthrifts, you will be taking a portion of your income to pay off credit card debts which were incurred when you were spending money before you had even received the income.
Make sure you holdmontpo some of your hard earned money each month otherwise in the future you'll have nothing to fall back on when the inevitable unexpected expense arrives.

http://www.wheresthemoneygone.com/home.html

Monday, May 09, 2005

Where's the Money Gone?

This question must be asked by at least a million people a day around the world. Money is one of the most amazing things around when it comes to disappearing. One minute here, the next minute gone. So why is it that our money simply disappears?
We live in a consumer society. There is always more to consume than you have the money to spend. A never ending list of "stuff" which you can buy and which in the end makes very little difference to your happiness.

http://www.wheresthemoneygone.com/home.html