Once considered the ninth planet in the Solar System, Pluto was relegated to dwarf planet status by a conference held in 2006, much to the consternation of many in the scientific community and wider world.
While some viewed this demotion as a tragedy, Pluto can be a useful case study for how to successfully navigate and adapt to unexpected setbacks in financial planning.
Pluto’s reclassification teaches us to deal with what’s in our control
Pluto was discovered by accident on 18 February 1930. And despite being only half the size of the United States, it became the Solar System’s ninth planet.
However, on 24 August 2006, the International Astronomical Union (IAU) passed a resolution that redefined Pluto as a dwarf planet.
Nothing changed to warrant this decision other than scientific opinion.
The same often happens in financial planning – there are myriad factors that exist outside of your control yet directly impact your wealth.
Every day, investment markets move up and down, causing your portfolio to rise or fall in value. New fiscal policies impact how much tax-efficient wealth you can create. Unexpected life events can suddenly impede or boost your income.
It’s also important to understand that you cannot predict when obstacles will arise or the extent of their effect on your wealth.
Instead, enhance the security of your wealth by:
- Setting up personal protection
- Building an emergency fund
- Conducting regular spending reviews
- Maintaining a personal spending allowance to enjoy life with.
So long as you have a well-designed plan with multiple layers of protection, you can rest easy and find peace of mind knowing that your wealth is shielded to the best of your abilities.
Block out the noise and stick to your own orbit
One of the several reasons for Pluto’s reclassification was its unique orbit.
Unlike other planets in the Solar System, which each orbit the Sun in a flat, circular plane, Pluto’s orbit is elliptical and tilted. This means it rotates around the Sun every 248 years in an oval shape and at a 17-degree angle.
Pluto literally follows its own path, which ultimately led to its dissociation from the other planets of the Solar System.
This distinction is, in fact, a benefit in financial planning.
We are bombarded with views and opinions about how we should plan our finances every day.
But financial plans are designed based on your own individual needs and rarely work as one-size-fits-all strategies – what is suitable for one person might not be for you.
When it comes to your financial plan, it’s better to stick to your own orbit rather than change it in response to external opinions or headlines. And if you do listen to advice, make sure it is from a professional who is attuned to your specific circumstances.
Reframing your perspective can help you confront market setbacks
When Pluto was discovered as the ninth planet in our Solar System, it also became the 10th smallest celestial body. Its equatorial diameter of 1,477 miles means that Pluto is about one-fifth the width of Earth.
Yet, after its relegation, Pluto gained a new nickname: King of the Kuiper Belt, which is a vast, doughnut-shaped ring of other dwarf planets and icy bodies residing beyond Neptune.
Despite being the smallest planet in the Solar System, Pluto was the largest known body in the Kuiper Belt, hence being named its “king”.
Reframing your perspective is as valuable to Pluto as it is to your financial plan, particularly apt when navigating stock market uncertainty.
When your investments experience market volatility – a sudden drop or spike in value – it’s easy to panic about losing your money in real time. However, market blips happen every day, even to the more serious extent of the dotcom bubble burst or the 2008 financial crash. And history tells us that markets recover over time.
That’s why it’s important to reframe the situation and look at your gains over a longer period, instead of focusing on temporary dips.
Accepting that market volatility is a natural part of investing can help you rewire your relationship with the market, viewing short-term losses as speedbumps on your way towards long-term growth.
The New Horizons flyby and how advice can enhance your understanding of financial planning
In 2015, the New Horizons spacecraft flew past Pluto, providing the world with the first close-up images of the mysterious dwarf planet on our Solar System’s outer rim.
The images revealed valleys, plains, and a heart-shaped crater, as well as mountains made of ice and frozen gases like methane.
The New Horizons mission transformed Pluto from a blurry blob to a complex, geological world.
Likewise, when you face a setback in financial planning, what follows is an opportunity to put your plan under the microscope to discover what went wrong and how you can prevent it from happening again in the future.
A financial planner can be a valuable asset in this process, providing a thorough analysis of your current situation to identify pain points and curate strategies to overcome these issues should they arise in the future.
Get in touch
If you’ve been inspired by the story of Pluto, we can help you apply its lessons to your own financial plan.
Please get in touch or email us at advice@mlifa.co.uk for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate cashflow planning.