20-80 Cash Flow Rule

A framework for managing personal finances when scaling income, based on Andrew Wilkinson's experience building wealth through business success.

The 20% Rule Core Concept

• Spend up to 20% of pre-tax cash flow on personal expenses
• Invest remaining 80% back into investments
• Applied this when making $4-5M annually in cash flow

Implementation Example

• On $5M annual cash flow:
  • $1M allocated to personal spending (20%)
  • $4M allocated to investments (80%)
• Allowed for luxury lifestyle while ensuring wealth building
  • Bought nice but responsible house
  • Purchased luxury cars (Porsche, Tesla)
  • Maintained high quality of life without excess

Benefits of the System

• Creates sustainable wealth building
• Avoids common entrepreneur trap of living like a "pauper" waiting for big exit
• Allows enjoyment of success while still growing wealth
• Provides steady lifestyle funded by cash flow rather than requiring exit event

Evolution of the Rule

• Started with 20% rule during initial success
• Gradually reduced spending percentage as income grew larger
• Demonstrates principle of lifestyle inflation control even as wealth grows

Key Insight

• System allows entrepreneurs to live well while building wealth
• Focus on cash flow rather than exit events for lifestyle funding
• Creates balance between enjoying success and building long-term wealth