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  • Writer's picturethemoneyloaf

All our passive income & cash flow in 2021

Updated: Jan 17, 2022

Like most people interested in the FIRE movement, our net worth is one figure we monitor monthly.

On top of that, the other number that I like keeping an eye on is our passive income cash flow, which is an umbrella term for all the money we make from anything outside our day jobs.

This year, we generated $14,994 in cash flow from the following sources:

  1. bank interest

  2. bond payments

  3. dividends

  4. options

  5. a hypothetical 3% drawdown of our ETFs (a more conservative estimate of the traditional 4% withdrawal rate)

In 2021, we spent $53,036. So we covered about 28% of our expenses with our passive income.

It's also nearly double 2020's figure of $7,581. You can check out my numbers page for snapshots of all previous years.

The one downside to our current passive income is that it's heavily concentrated in my options positions. The long term goal would be to diversify a bit more equally across dividends, options and ETF drawdown.

For 2022, our goal is to push our expense coverage to 40% with a stretch goal of 45%. We'll look to achieve this by both increasing our passive income number, and reducing our annual expenditure to $50k.

I'll also be increasing the hypothetical drawdown to 4% (up from 3% currently). The reason for this is I've come across lots of information this year that suggests that even the 4% rule is too conservative, and in many cases leads to a surplus of funds in retirement.

As we're not even going to be wholly reliant on the 4% withdrawal rate, I'm prepared to work with a higher hypothetical number now, and adjust it along the way if necessary.

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