You will design one automatic saving rule and one commitment device you will actually set up.
You've seen why "I'll start next month" fails, why defaults decide so much, and how a commitment about future money gets around present bias. This exercise turns those ideas into two things that run without you: one automatic saving rule and one commitment device. The aim is to finish with both set up, or as close to set up as your bank allows today, rather than with a plan to set them up later. Lesson 5.1 explained what usually happens to plans to do things later.
An automatic rule has three parts: an amount, a date and a destination account.
Choose the amount from your budget rather than from what you hope to manage. If you've worked through Money Foundations, your budget already names a figure for savings. If you haven't, choose a sum you're confident you can sustain for a year even in a bad month. A smaller rule that never breaks is worth more than a larger one you cancel in March. You can raise it later, and your commitment in step 2 will do some of the raising for you.
Choose the date as soon after payday as possible. The day your salary arrives, or the next working day, is ideal. The later the transfer, the more chances the impatient version of you gets to spend the money first.
Choose a destination that is separate from your spending account and slightly inconvenient to reach. A different bank works well. So does an account with no debit card attached and no shortcut in your phone's main banking app. The goal is not to make the money impossible to reach, only to make it take one deliberate step.
The commitment links a future event to a future increase in saving. The usual events are a pay rise, a bonus, a promotion, or the end of a cost that's about to stop, such as a loan's final payment or a child's childcare fees.
Write it in the form: when this happens, this amount goes here, by this date. "When my next pay rise appears on my payslip, half of the increase is added to my payday transfer within a week" works. So does "When my car loan ends in June, the S$680 I was paying goes into my regular savings plan from July." That second kind is one of the easiest commitments to keep, because you're already used to living without the money.
This step sounds strange, but it's what makes the rule last. Write down the specific situations in which you'd be allowed to pause or reduce either rule. For example: losing your job, your buffer falling below a set amount, or a medical emergency.
Two things happen when you do this. First, the rule becomes more honest, because a rule with no exceptions often gets abandoned entirely the first time life intervenes. Second, you've already decided that any reason missing from the list, like a sale, a trip or a tough week, doesn't count.
Open your banking app and set up the standing instruction or GIRO transfer while you're still reading this. Most Singapore banks let you schedule a recurring transfer in a few minutes. If your commitment depends on a future payslip, set a calendar reminder for the expected month with the exact wording of your commitment in the reminder, so the person who sees it doesn't have to remember what you meant.
Hui Min is paid on the 25th. Her automatic rule: S$600 on the 26th of each month, from her salary account to her wedding fund, which she moved to a better-paying account after lesson 3.4. It sits at a different bank from her salary account. She chose S$600 because her budget showed she could do it even in a month with a family birthday and a medical bill.
Her commitment is triggered by the bonus payslip: when her year-end bonus is paid, 40% goes into her regular ETF savings plan within seven days, before anything else is bought.
She allowed herself three reasons to change either one, and only three: losing her job, her buffer falling below S$15,000, or the wedding date moving forward.
She set up the S$600 transfer on the spot. The bonus commitment went into her calendar for the week bonuses are usually paid, along with a second reminder on the first day of the following month to check that both are working.
Set up your own automatic rule now, write your commitment with its trigger, and pick the date you'll check both are working.
Set up the automatic rule, write the commitment with its trigger, and note the date you will check both are working.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).