The right way to 'Pay Yourself First'

When personal finance articles advise you to "Pay yourself first", they usually mean to save up a fixed portion of your income and then spend the rest. 

I find this relatively inefficient. 

I do it the other way round whereby I give myself a fixed allowance and save the rest. 

This removes the ceiling of my savings as I don't set a fixed proportion or amount aside.

Instead, I allocate a fixed amount for my living expenses to maintain my existing lifestyle.

This means that I still maintain the same level of spending while my income and savings are increasing.

Of course, there are times when I need to do additional top-ups because of big-ticket purchases or other needs.

But just like how easier it is to notice how much you are spending on commuting when you top up your ez-link card at the ticketing machine instead of setting up auto top-ups; limiting yourself to a fixed amount of money and topping up when necessary rather than having access to a large pool of savings in the bank and credit on the card will make it more noticeable when you are spending more than usual.

You don't need a bill shock to remind you that you are spending too much

I find this very effective to discourage me from lifestyle inflation as my income increases.

So much so that sometimes I would even forget how much I'm actually earning because my spending isn't dependent on my income.

This is probably why I'm always having a pleasant surprise whenever I look at my savings :)