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That's exactly how it's suppose to work. When your RAM starts filling up, Windows will move unused apps to virtual memory (paging file on your drives) so it can save RAM for immediate use by other apps.
If you are running into lag issue (whatever that is), then it is usually either memory getting full, too many mods that are altering the game and chewing up too much CPU time. Maybe your city is nearing limits and causing lag issues.
But the only way to allocate more RAM, is buying more RAM. If you want to allocate more memory, then you can try to turn off Windows auto-paging file resizing, and manually setting your paging file size to the size or you RAM, or two or three times your RAM, depending on how much you need.
Here's a good paging file How To (Make sure you set minimum and maximum the same size):
https://www.youtube.com/watch?v=bRe_MtNvVSM
You can also disable all of your apps to disable them from auto-launching with windows in Task Manager (CTRL+SHIFT then tap ESC) under the startup TAB.
But it help is you specify the lag. Is the game running slow as it takes longer than 10 seconds for a day to pass? Traffic is moving slower than normal? FPS is really low (How many FPS do you get)? Long loading times? Et cetera.
I am glad to hear that the pagefile helped you.
That said I have as well 16GB and a 34GB pagefile with close to 3564 assets and 100 mods now. Which is probably the max I can have unless I get more memory or a bigger pagefile :)
I was able to add some more RAM to my PC recently, I now have 20GB. The combination between moving the pagefile to the SSD and adding more RAM solved part of the problem. There was also lag created by my CPU being slowed down because of a broken driver. It send so many requests that the 1st core was constantly busy which basicaly slowed down my computer without it being obvious looking at taskmanager.