The power of one degree course correction

compass-ES6769

28 Feb The power of one degree course correction

In 1979 a passenger jet carrying 257 people left New Zealand for a sightseeing flight to Antarctica and back. Unknown to the pilots, however, there was a minor 2 degree error in the flight coordinates. This placed the aircraft 28 miles to the east of where the pilots thought they were. As they approached Antarctica, the pilots descended to a lower altitude to give the passengers a better look at the landscape. Although both were experienced pilots, neither had made this particular flight before. They had no way of knowing that the incorrect coordinates had placed them directly in the path of Mount Erebus, an active volcano that rises from the frozen landscape to a height of more than 12,000 feet (3,700 m). Sadly, the plane crashed into the side of the volcano, killing everyone on board. It was a tragedy brought on by a minor error—a matter of only a few degrees.

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. This means that the further you travel, the further you are from your destination.
If you’re off course by just one degree, after one foot, you’ll miss your target by 0.2 inches. Trivial, right? But…

  • After 100 yards, you’ll be off by 5.2 feet. Not huge, but noticeable.
  • After a mile, you’ll be off by 92.2 feet. One degree is starting to make a difference.
  • If you veer off course by 1 degree flying around the equator, you’ll land almost 500 miles off target!

The point here is that small actions, accumulated over a very long time make a huge difference.
Financial planning is in many ways like flying a plane. Both involve trying to reach a destination as safely and quickly as you can.

This is why at Tandem, we encourage our clients not to leave their finances on auto-pilot. We go to great lengths to set the course correctly in the beginning and we make constant course corrections along the way. Some of the actions might seem trivial on their own, but over a long time, they make a huge difference. Having a plan for your money, using your yearly ISA allowance or rebalancing your portfolio might not seem like much. But over time, these small steps help you build your wealth slowly but surely.