Why investors must embrace discomfort

For legendary Australian investor Steve McKnight, reaching your full wealth potential comes when you live outside your comfort zone.

One of Australia’s best selling authors and speakers, Steve retired from his accounting career at just 32 years old, and he did it by stretching himself well beyond his comforts. In just three and a half years, Steve bought more than 130 properties which unlocked new levels of wealth and also the ability to teach countless Aussies to do the same.

Steve joined KnowHow founder Bushy Martin on the Get Invested to talk about why investors can’t settle with being ‘comfortable’.

The problem with being comfortable as an investor

Steve said while being comfortable might feel right at the time, it isn’t the smartest way to set yourself up financially in the long run.

“I think what ends up costing people is being comfortable. They don’t realise that the cost of comfort is financial security later in life when they’re not earning the money. The inability of people to forecast their financial situation, and the over-estimation of how much time they’ll have when they get around to actually making a goal, that precludes people from being a success later in life,” Steve explained.

“Eventually, you won’t be in a position where you’ll be ‘comfortably comfortable’ anymore because you will have lost your ability to earn an income, because you would have retired, and then you’ll be forced to shift and there’s not much you can do about it. So what you need to do is move from ‘comfortably comfortable’ into ‘uncomfortably comfortable’. But you’ve got to find a reason that jolts you out of your comfort zone.”

How investors can move from comfortable to uncomfortable

Investors need to take steps, and risks, towards being ‘uncomfortably comfortable’.

“The first step is to going to ‘uncomfortably comfortable’. Then, if you really want to turn on the gas, you’ve got to go to ‘uncomfortably uncomfortable’. And that is outside of your comfort zone, which is where the magic happens. This is stretching yourself. Buying 130 properties in three and a half years was not a ‘comfortably comfortable’ experience. So it’s doing the things you don’t want to do when you don’t want to do them. You think about the things in life that have been major success moments for you, and I’m willing to bet you were in an ‘uncomfortably uncomfortable’ position,” Steve said.

This then becomes a cycle of progressing from uncomfortable to comfortable, and finding discomfort once again.

“So once you are in that ‘uncomfortably uncomfortable situation’, you start to fix it. You’ll then move into ‘comfortably uncomfortable’. So what was uncomfortable is no longer quite as uncomfortable. And then when you solve the problem, guess where you’ll be back at? ‘Comfortably comfortable’ again. And so this is a cycle. And if you want to go from good to great, you need to work your way through the cycle and say to yourself, ‘where am I ‘comfortably comfortable and how do I move it? Well, you have to move through those steps that we’ve been through right now. And if you do that, you’re choosing to forsake comfort for discomfort in order to build resilience, skill and ultimately strength.

“If you go to the gym and you lift weights that aren’t a challenge for you, you won’t build muscle. You might tone, but you won’t build muscle. You need to build muscle to be a bigger financial success. But without the right technique, you’ll only hurt yourself – the same is true financially. You need to learn the technique before you try and lift the weight. Otherwise, you’re just going to end up with a sore back.”

Investing from an early age

Steve said it’s also much better to invest at an early age and embrace the idea of delayed gratification.

“Time is the most important. But what happens is we leave it too late. The twenties is an era where we go and explore the world, and our thirties is settling down and starting a family, then our forties is paying for the kids education, and then you wake up one day in your fifties. And you’ve left the hard yards till too late, and because of that you then need to take greater risks to get the bigger return. And then that leads you to possibly getting into ventures which aren’t particularly sound. And then you think, oh it’s too late for me I’ve missed the boat, and therefore you’ll probably end up on the pension,” he said.

“So it’s about delayed gratification. But this will only ever happen if you’ve got a reason to put off self-gratification, and it needs to be stronger to delay than to consume. Now, whether you need the revelation that the pension won’t be enough to support you in a comfortable lifestyle when you need it most later on in life, or whether you want the reward of retiring earlier, you need to find a thing that’s going to leverage you out of your comfort zone. I mean, I retired at 32. It’s possible if you get started early enough.

“But if you don’t do this, I’m afraid to say it, but the statistics are that you’re likely to end up on the pension. Three quarters of people play the game of life according to the programming they inherited from their parents and family, and they end up on the pension. So we need to reprogram and do it sooner rather than later.”

Finding the right approach for you

Investors can choose between ‘slow and steady’ versus ‘fast and furious’ when it comes to their wealth building approaches. The better approach for you will depend on how much time, money, skill and risk tolerance you have available.

“You can get wealthy with a slow and steady approach if you’ve got time on your side. But sometimes people don’t have time on their side or sometimes people want to accelerate their progress. So they get done in a few years what might otherwise take many years or decades. And for example with me, I retired in my early thirties, rather than working until I was 65. So I had to cram in effectively 30 years of work into seven years of investing, and it was a lot of hard work and and a lot of time and a lot of late nights,” Steve revealed.

“But it’s up to you to decide whether you want to be slow and steady. Maybe you’ve got a lower risk tolerance, maybe you’ve got a lower skill base and you invest in growth assets for time. Or if you’re someone who wants to be a bit more fast and furious, then you can choose your own adventure. But first you need to scale up, because if you don’t scale up, you’ll end up taking what I call naked risks, which means that you’re only one wrong move away from financial oblivion. And that’s not sensible in any way, shape or form.”

Listen to the full interview here.

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