Growing up, I was a massive Harry Potter fan. TBH I still am.

I strongly believed that I was going to get a letter from Hogwarts on my 11th birthday.

SPOILER ALERT: that didn’t happen.

However, this traumatizing childhood injustice helped me realize that magic wasn’t real, and that I needed to put my faith in something different: math.

When it comes to building passive income, there isn’t a magic formula, but there is a math one.

Passive income is just money you make from sources other than your job. This can come from a range of sources:

Bigger list here

But don’t confuse “passive” with “effortless”. A lot of these passive income streams can take a lot of set-up work or ongoing maintenance.

Only 1 in 5 American households earns any kind of passive income. And for those who do, the median is just $4,200 a year.

HOWEVER, when you know the math, you can ramp that up.

Let’s say you want to hit $10,000/year in passive income. Not dream-level rich, just a solid, life-improving number.

Here’s exactly how much you would have to invest in different assets.

Those numbers aren’t meant to intimidate; they’re meant to clarify the path. The truth is, most people never build meaningful passive income because they never actually run the math.

The top 10% of American households own 89% of all stocks. And 50% of the wealthiest also own rental property.

This isn’t a coincidence.

Passive income isn’t about being clever.
It’s about owning assets that pay you, and doing it on purpose.

Owning assets that pay you is how people become truly wealthy, and stay that way.

Did someone Obliviate you while reading this? I said, NO MAGIC.

1. Stack different yield streams.
You don’t need $250K in one asset. Combine $100K in REITs, $75K in dividend stocks, and $50K in a savings account. Now you’ve diversified risk and optimized yield.

2. Use cash intentionally.
Don’t overlook boring tools. A 4.5% savings account can still carry part of the load. That’s guaranteed income while you figure out the rest.

3. Focus on capital first.
If you’re far from the number, your best move is saving and investing more, not chasing exotic returns. Use non-taxable accounts (i.e. Roth IRA, Roth 401(k), HSA, or 529 Plan), reinvest dividends, automate your investments.

4. Don’t wait to “go big.”
Even $100/month = $1,200/year in passive income. Stack a few of those and the snowball gets rolling fast.

The point isn’t perfection, it’s progress.

You aren’t going to retire overnight. But over time, stacking these different passive income streams will eventually turn into a machine that earns money while you sleep.

And while it may sound like magic, it’s just math.