The proverb makes use of laws of gravity in relation to water. It is a well known fact that water only flows to a lower place. Our elders hence observed that water would always flow down a mountain and never upwards. If water has passed in its downward direction it will not engage in a reversal by going upward. In this allegory they realized the futility of dwelling on things that have passed and are irreversible. For instance utilized wealth counts as no relief to prevailing needs.
The proverb is used to persuade someone to not live in the past or not to dwell overly on former opportunities or resources when circumstances have changed. It is particularly useful in situations where one recounts their former wealth or resources already used when they are confronted with new prevailing needs.