In 1979, a passenger jet carrying 257 people left New Zealand for a sightseeing flight to Antarctica. The pilots had never flown this route before, and unknowingly, they were off by only 2 degrees which placed them 28 miles to the east of their intended destination.
As they approached, the pilots began descending to give the passengers a better look at the landscape. This slight 2-degree difference had the plane flying directly into Mount Erebus, an active volcano reaching a height of more than 12,488 feet (3,700m). The aircraft crashed, and sadly, no one survived.
The 1 In 60 Rule
Experts in air navigation have a rule of thumb known as the 1 in 60 rule. It states that for every 1 degree a plane veers off its course, it misses its target destination by 1 mile for every 60 miles you fly. Said differently, the further you travel, the further you are from your destination.
A one-degree mistake in aviation means:
After 100 yards, you’ll be off by 5.2 feet (you land off-center)
After a mile, you’ll be off by 92.2 feet (you miss the runway)
If you fly around the equator, you’ll land almost 500 miles from the intended destination (you miss the state or country)
Small shifts make huge impacts over a long period of time.
Today, it seems like there is an autopilot for everything. From scheduling meetings to meal delivery and even personal finance, everything can be automated.
People in the technology sector use a rule of thumb when it comes to automation. You should only automate things that are true 100% of the time.
Investing and financial planning can involve automating habits; however, financial planning can’t be automated because nothing remains true 100% of the time, life changes. Some companies claim they can automate your financial journey to independence; however, this is nothing more than pure marketing.
You deal with personal circumstances that algorithms can’t fix (yet). Your finances, goals, work, timelines, income, relationships, and debt (just to name a few) move around. Financial planning is part art, part science. It’s establishing a plan and adjusting over time to arrive at an intended destination.
An excellent example of this lies within the investment industry and the establishment of target-date funds. The idea of these funds was to account for your age and date of retirement. People that believe in them would argue they are more sophisticated; however, I would disagree, and so does Kiplinger.
Target date funds are a byproduct of marketing, nothing more. It’s a set it and forget it approach similar to automated investment platforms.
One of the most significant areas of concern for anyone saving for retirement is the sequence of return risk. You can do everything perfectly; however, if you retire at the wrong time, you could face a dramatic setback. If you would like to see the case study on sequence of return risk, click here.
This case study shows two brothers who worked at the same company, made the same salary, and invested the same way. The difference is one brother retires in a bull market and the other in a bear market (the results are eye-opening).
You can protect yourself from this risk by planning now.
Automate your habits, not plans. While you may feel that you are on course today, small shifts over long periods of time can derail you from accomplishing your intended goal.
While you can see it can be very easy to veer off course, small course corrections can help you and your loved ones get back on track.
If you’d like to set up a quick 20-minute call with a member of our team, click here.