Earning $10,000 a year in passive income from ASX shares certainly would be nice, right?

Well, the good news is that with a combination of long-term investing and smart portfolio management, it is more achievable than you might think.

The key is to start with growth, then transition to income—building your capital first and then shifting to high-yield ASX dividend shares to generate reliable passive income. Here's how it works.

Step 1: Build a $200,000 portfolio with ASX growth shares

The foundation of passive income investing is capital. Before you can live off dividends, you need a substantial portfolio. One way to do this is by investing $1,000 a month for 10 years, targeting an average total return of 10% per annum (not guaranteed, but historically reasonable for quality growth stocks).

This approach benefits from compounding returns, as reinvesting gains helps accelerate growth over time. Investing in quality ASX growth shares with strong earnings potential could even lead to faster capital appreciation, getting you to target sooner.

The key is staying consistent with investing—regardless of market ups and downs—ensuring that you're always building your portfolio, taking advantage of opportunities when prices dip.

If you stay the course, your portfolio could grow to around $200,000 over a decade.

ASX growth shares that could be worth considering are Life360 Inc. (ASX: 360) or Lovisa Holdings Ltd (ASX: LOV).

Step 2: Transition to high-yield ASX dividend shares

Once you've built up your investment capital, the next step is switching to passive income mode. This means restructuring your portfolio towards quality ASX dividend shares (or ASX ETFs) that offer a combined 5% average dividend yield.

At a 5% dividend yield, a $200,000 portfolio could generate $10,000 per year in passive income—without ever having to sell a single share.

Some investors choose blue-chip dividend stocks like the big four banks, which have a history of paying strong, fully franked dividends. Other options include Telstra Group Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES), which offer steady income streams from their reliable cash flows.

Alternatively, there are ASX ETFs out there that bring groups of dividend-payers together, such as the Vanguard Australian Shares High Yield ETF (ASX: VHY). It provides diversified exposure to top dividend-paying companies, reducing the risk associated with individual stocks while still offering an generous yield.

Foolish takeaway

Earning $10,000 in passive income from ASX shares is very possible with consistent investing and a long-term plan.

By focusing on growth stocks first, then dividends later, you can turn a regular savings habit into a dependable source of income—all while letting your money work for you.