This is post #25 from the 30 Day Personal Finance Challenge: Boost Your Financial Health with a Daily Tip!
The conservation of energy principle is one of our most cherished laws of physics.
Energy cannot be created or destroyed, it can only be changed from one form to another. – Albert Einstein
Here is an idea:
Just like energy, money is never lost.
Why is this an important notion? Because it immediately moves our perception from scarcity to abundance. If I have more, it doesn’t mean that someone else will have less.
It’s all a circle!
Imagine a circle of 5 people*. The first person has a $5 bill. Person1 buys something from person2 for that money. Let’s say it’s an apple. Then person1 has an apple, and person2 has a $5 bill.
If person2 now uses the same $5 to buy a banana from person3, then person2 has a banana, and person3 has a $5 bill. Then person3 uses the $5 to buy a peach from p4 and so on and so forth.
The exact same $5 were used to bring value to each person that had it. That same $5 went through 5 different people and created $5 worth of value for each and a total of $25 of value for the group. That $5 didn’t get depleted and as it circled around created value for everyone.
Every time you purchase any good, the money you spend gets cascaded down to the manufacturer, their suppliers, the suppliers of their suppliers, all the workers and so on. You receive the value of the good as a return.
If someone buys from you, then they benefit from the value and you benefit from the income which you then can re-distribute. It’s a never ending recursion.
Money is not only domain of the mega rich
The notion that the wealthy people have and somehow hoard all the money so there’s none left for anyone else is absurd. This belief assumes that there’s a limited supply of money. They keep printing more of the stuff every day. Money supply hasn’t been tied to any real asset for decades.
Money doesn’t get depleted
You can use the same money for years, and years and thousands and thousands of people. The more money you have, the more you can put into the circle which means other people have more money to trade for more value.
When you have money and use it, you and the person you spend it with both have the value.
I like this notion because it shows a deeper level of the wealth mechanics. It reveals a lively circular exchange. Money or value only change from one form to another, they are never lost.
Once I started to look at money in this way I became more mindful about what I exchange my money for. When I spend, I have a good feeling of this money going to all the people who created the value in the first place.
* More about this concept you can find in the book Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth