In this week’s PhREI network post, Daniel Shin of The Darwinian Doctor tried to answer the question: how much cash flow do you need to change your life?
I think he does a great job of going about this and if you like this, keep tuned for a post of mine coming up showing how Selenid and I have now replaced 1/5 of our income with passive cash flow!
For now, take it away Daniel!

Every few months I publish an edition of Anno Darwinii, the report on my real estate empire. In the last edition, I announced that weād reached a projected $29,000 of cash flow from our portfolio for 2021.
As I crunched my numbers and published that post, I felt a sense of pride and momentum from that number. āFinally, the numbers are starting to add up,ā I thought to myself.
But as I often do, I considered how some of my higher income readers might consider that number: āTwenty nine thousand dollars? Thatās cute, but itās not enough to move the needle. Itās not worth the hassle.ā
This imagined conversation in my head percolated for a while as I considered the more general question: How much cash flow do you need to change your life?
When I say ācash flowā here, Iām talking about income from something outside of your day job. Preferably passive in nature, this is the type of money that can change your life trajectory.
I believe there are two levels of cash flow that can be life changing:
- $1 of cash flow
- Cash flow equal to 20% of your annual income
Please allow me to explain!
Cash flow is a gateway drug
Thereās a reason why Nancy Regan famously said, āJust say noā to drugs in 1982. Sometimes, the first taste of a drug is all it takes to cause addiction.
My first taste of cash flow was like a drug. From the very first dollar of cash flow from my rental real estate, I just wanted to grow the cash flow more and more. This led to a rapidly accelerating rate of asset acquisition.
This cash flow accelerated my plan for financial independence, and recently cut an incredible five years off of my 15 year plan to FIRE. All of a sudden, Iām considering a kind of life that is wholly different from the ordinary life I imagined before.
So if youāre like me, any amount of passive cash flow can be life changing. Even $1 of cash flow can change your mindset to understand that true freedom comes when your income is not tied directly to the number of hours you are working.
This realization can quickly lead you down a slippery slope that ends in the blue lagoon of financial independence.
But letās discuss a more concrete amount that I feel should be everyoneās starting cash flow goal.
The 20% rule
If youāre like most people, you work five days a week.Ā (Plus if youāre a physician, you may work more than this!)Ā
If you can generate cash flow equal to 20% of your income from another business or side gig, a few things have happened.
- Youāve generated the ability to work only four days a week
- Youāve got āthe gapā to do some serious compounding
- And youāve got the know-how to keep going
A four day work week?
Imagine what you could do with one full day off every week. Could you:
- Focus more on your health?
- See your kids more?
- Work on your passion projects or side gigs?
- All of the above?
Would you call that life-changing? I certainly would.
Of course, not all jobs will allow for a reduced schedule, but the financial flexibility to even consider this is pretty revolutionary. It opens up your world to all sorts of possibilities.
Buying more life
Even if your job doesnāt allow part time work, that 20% extra income can be put to work to greatly accelerate your path to financial independence.
Hereās a simplified example to show you the power of the extra 20%:
- Income of $100,000
- Annual expenditures per year: $80,000
- Regular savings per year: $20,000
- 8% compounding return on savings
- $ needed for financial independence by the 25x rule: $2 million
Without extra cash flow, itāll take at least 29 years to save enough to retire.

With an extra $20,000 of cash flow every year, itāll only take 21 years. The extra cash flow shaved off almost a third of the time needed to reach financial independence!

I know, I know, this isnāt revolutionary. Itās just math. Save more, retire faster. But thereās more.
Itās more than money, itās knowledge
If youāve successfully been able to generate 20% of your annual income in flow, you know what youāre doing.Ā Youāve probably been through enough trial and error to have a road map to continue the growth.
So the skyās the limit! You have the tools to go for complete replacement of your income, if desired.
Do you think the Dr-ess and I are going to stop when weāve hit the 20% mark?
How has cash flow changed my life?
Letās put this question into perspective in my own life.Ā The $29,000 of annual money flowing from my current stabilized portfolio is just under 10% of my annual base salary.Ā Ā
While I agree that this amount doesnāt really dent our significant spending, it already has made a big difference in my day to day.
I feel more freedom to take care of my health and well-being, which helps to combat the negative effects of over-work. I feel less pressure to work overtime, and have more confidence to continue my investing.
And Iām certainly not done. As Iāll outline in the upcoming Anno Darwinii, in the first half of 2021 alone, we tripled the size of our real estate empire. When that all comes on-line⦠well, I canāt wait to see what happens.
Conclusion
So how much cash flow do you need to change your life?
To answer the question again, I feel that even $1 of cash flow can be life changing. That single dollar can change your whole mindset and break the connection between hours worked and income earned.
But in my opinion, the first time that it starts to change your day to day life is when it replaces 20% of your annual income.Ā Ā
This isnāt a hard and fast rule, though.Ā This answer will really be different for everyone.
What do you think? How much is enough cash flow? Is any passive? Want more? Let us know in the comments below!
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