The start of a new year is a time to look forward to the future -- and to make resolutions that can turn the future into something worth looking forward to. 

For many people, financial resolutions make their way onto their list of goals, in large part because money management is often a source of anxiety. While there are lots of objectives you could set for yourself, there's one key resolution you should make that stands apart from the rest. In 2021, you should resolve to start making your money work for you so you don't have to work so hard. 

Young woman imaging a bag full of money.

Image source: Getty Images.

Why you should resolve to make your money work for you

For many people, money comes in and then it goes out, spent on immediate needs and wants. This cycle repeats, making it impossible to ever accomplish big financial goals, such as saving for retirement or building an emergency fund that can provide a measure of security. It also explains why more than four in 10 adults couldn't cover a surprise $400 expense -- including almost one in five households earning more than $100,000 annually. 

If you're simply spending your money as soon as you make it, chances are good that you aren't making the most effective use of it. And even if you aren't spending every dollar, you still may be missing out on opportunities to make your money work as hard as it can for you. 

If you aren't currently using at least some of your hard-earned dollars in the most effective ways to build wealth, resolve now to change that in 2021.

How can you put your money to work? 

Putting your money to work for you involves taking a few key steps:

  • Giving your dollars a job
  • Making sure some of those dollars are earning you more money

Giving your money a job involves making a budget that allocates it to the things that matter the most to you. With careful budgeting, you can accomplish a few things. First, you can make sure you're actually getting the most value from your discretionary spending. This is one way to make your money work harder, since more purposeful spending allows you to wring every drop of pleasure out of any fun spending you do.

Second, and more importantly, you can make sure you allocate a good amount of your money to invest in income-producing assets. For most people, this means putting some of your money into the stock market. Investing in the market is likely going to be the single best way to make your money work for you, as equities have a historical track record that can't be beat when it comes to balancing risk and potential reward. 

When you invest money in the stock market, the returns you earn can be reinvested and actually earn you more money. Through the magic of compounding, the funds you've already put into equities can build a money-making machine that provides exponential growth and allows for real wealth building -- especially if you build a diversified portfolio of well-researched stocks. 

That brings us to the third way of making your money work as hard as it can for you. It involves developing a sound investment strategy to maximize potential gains while exposing you to the appropriate level of risk. For most people, this means choosing low-fee index funds. But for those with the knowledge and willingness to put in the time, it means using your money to build a portfolio of stocks you're comfortable holding for the long term. 

If you want your money to buy you freedom and security one day, making a New Year's resolution to put it to work for you in the most effective ways possible is the first step to get you there. It's the one goal you can set for 2021 that will make the biggest difference in your life over the long haul.