How your personal finances can survive a pandemic

It has been a tough year.

Yes, there was a global pandemic, but the economic fallout from shutdowns and entire industries collapsing has wreaked continual havoc on the personal finances of many Americans. Though those at the upper end of the income ladder may have seen their portfolios buoyed by a rising stock market, those on the opposite end have had a very different experience, which may have included unemployment and trouble paying bills. All investors sweated through a record-fast dive into a bear market, yet enjoyed an unbelievably strong rally to end the year. But wherever you found yourself on the spectrum, there were some personal finance rules that became especially important during this wild year. Here are a few that stood out, thanks to regular Fortune contributor Ben Carlson.

Avoid credit card debt like the plague

The first rule of personal finance is to never carry a credit card balance. Credit card borrowing rates are egregiously high and paying those rates is an easy way to negatively compound your net worth. If you carry credit card debt for a prolonged period of time, you’re not ready to invest your money in the markets.

Saving is more important than investing

Pay yourself first is such simple advice, but so few people do this. The best investment decision you can make is setting a high savings rate because it gives you a huge margin of safety in life. You have no control over the level of interest rates, stock market performance, or the timing of recessions and bear markets, but you can control your savings rate.

Check your borrowing

As Carlson wrote in March, when the economy takes a beating there can be some silver linings. If you took out a $350,000 mortgage 12 months earlier, you likely locked in a 30-year fixed-rate mortgage at around 4.5%. That equates to a monthly payment of roughly $1,775 (ignoring taxes and insurance). Then 30-year fixed-rate mortgages moved closer to 3.3%. On that same $350,000 mortgage, that works out to a monthly payment of around $1,530, a savings of $245 a month. That extra money can provide a cushion during a potential economic slowdown. The one bright spot from the crashing stock market is interest rates have made borrowing more affordable.

Get the big purchases right

As Carlson puts it, “I know I shouldn’t be so judgmental, but whenever I see $50K to $70K SUVs on the road or enormous McMansions the first thing that pops into my head is, ‘I wonder how much they have saved for retirement?’” Personal finance experts love to debate the minutiae of lattes, but the most important purchases in terms of keeping your finances in order will be the big ones—housing and transportation. Overextending yourself on these two purchases can be a killer because they represent fixed costs and come with more ancillary expenses than most people realize.

Young investors should look forward to bear markets

Young investors should pray for bear markets because it allows them to buy more shares at lower prices. Human capital is your biggest asset as a newbie investor, meaning your future earnings potential should enable you to save money over time and allow compounding to do the heavy lifting for you.

Don’t succumb to fear

A bear market is one of the worst times to completely overhaul your asset allocation because your decision-making ability will be clouded by your emotions. The all-in or all-out game is one of the most dangerous you can play when investing. Sure, you could luck out once or twice, but eventually you’re going to end up selling out before a huge boom or buying before a huge bust. The four times Carlson advocates selling: when you need to rebalance, when you need to diversify, when you’ve been proven wrong about an investment thesis, and when you’ve “won the game” and are ready to retire.

Near retirement, get conservative

A bear market at the outset of retirement can make things more challenging than a rip-roaring bull market, but there are ways to prepare yourself for the scenario that befell investors recently—and no doubt will again. A minimum of at least three years’ worth of spending cash in high-quality bonds or cash would give you enough coverage so you don’t have to panic-sell stocks at the worst time. Those approaching retirement could at a minimum begin funneling some of their savings in their later years into a safe savings account to cover their first year or two of expenses in retirement.

And, as we surely saw in 2020, even in the scariest bear market, a new bull market may be right around the corner.