Money as Fuel - Why Burning It Is the Point

Here's the first principle that changed how I think about money: money shouldn't be the goal. Money is meant to be used, or burned, to be effective. Think of it as gasoline or fuel. It must be used to create value, to transfer, or to make something out of it.

Traditionally, money was seen merely as a medium for exchange, but in today's world, it's much more than that. You don't just let it sit there. You can invest it, save it, change it, and make it work for you. When it's working for you, in essence, it's being burned to earn more. The idea isn't to hoard money but to create a feedback loop that gains you more.

Consider using money as a recursive resource; it can generate more of itself through compounding. This is one of the few human inventions that can create more of itself. While nature has its own forms of growth and reproduction, with money, you can gain a fixed amount of interest. It's a fascinating human creation.

Money as Stored Time

Another way to think about it is as storing your time. You've externalized your fuel (your time and energy) into money. This externalized fuel can then be used productively. Saving money in an account where it's not put to work doesn't generate returns because banks simply hold it as is. However, placing it in a savings account starts to burn a little bit of it, giving you interest in return.

When you invest in mutual funds or ETFs, you're essentially burning the entire amount by giving it to someone else to use. This concept is what I call burning to return. You burn money to get more money back from that equation.

Money is Meant to Be Used

On the flip side is burning to use, which involves spending money on products or services. You get a physical object in return. People often focus on burning to use because they want immediate benefits. However, the whole point of burning to return is to get more resources that you can eventually use.

Hoarding money for its own sake is actually a trap. If you have all the money in the world but don't know how to use it or what you want from life, you'll feel empty. Money needs to be used effectively; otherwise, it's just sitting there without purpose.

The Ultimate Goal

The ultimate goal should be creating a burn-to-return loop where your investments yield more than your consumption requires. When this happens consistently, you'll reach a state where you no longer need to work, true retirement mode. Your principal remains intact while covering all your needs and wants through returns on investment.

In this scenario, you've saved enough fuel (money) to live out the rest of your days comfortably. You've contributed enough value to the world and have been rewarded with the gift of free time for the rest of your life.

Remember, money in itself does nothing; it's the burning and usage of money (your energy and time) that creates effectiveness. Always consider what you would use your money for and save for later if there's no immediate need. Time is valuable, and keeping this in mind will guide your financial decisions effectively.