8 tips to make the most of your money in a down economy

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When it comes to your finances, now more than ever there doesn't seem to be a better plan than to take matters into your own hands.

That's what Pamela Yellen talks about in her new book Bank On Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future.

The Bank On Yourself plan is exactly that, making your money work harder for you so essentially you are banking on yourself.

Yellen believes some traditional investments may not be the best way to grow your money.

Here are some of her tips for finding the funds to start on the road to financial independence.

Even if, like many people, you don't typically have a pile of extra cash laying around at the end of the month, you may be surprised at the creative ways you may be able to fund a bigger plan than you thought possible, sooner than you thought possible.

1. Restructure Debt
In some situations, cleverly reducing debt will allow you to use the dollars freed up for your Bank on Yourself plan. The book reveals half a dozen ways to do this, which can free up a significant amount of monthly cash flow to help fund your first B.O.Y. plan.

2. Reducing funding of your 401(k) or other retirement plans
Many people find money to finance their B.O.Y. plan by backing off funding their 401(k) or other retirement accounts, and continuing to pay only the amount their employer matches. This brought them the guarantees, tax advantages, and flexibility a B.O.Y. plan provides, that their traditional, government sponsored 401(k), IRA or pension plan does not. This lets them stop playing retirement plan poker and have the peace of mind that a predictable retirement income stream brings.

3. Raid your IRA or 401(k)
You can use a federal plan, the 72(t), to pull money out of your traditional retirement plan, which can then be used to fund your B.O.Y. plan. This enables you to avoid the usual premature distribution penalty anyone younger than 59 1/2 would otherwise be required to pay. (Be sure to consult with a qualified advisor and tax professional.)

4. Tap your savings
If you have been building an emergency fund, a B.O.Y. plan can also serve as an emergency fund, so you may want to consider opening a plan and moving your current savings into it. Moving some of your 'safe' money into a B.O.Y. plan means dollars working much harder for you, without losing sleep.

5. Rethink that tax refund
Some people love getting a big tax refund check in the mail every year. But that's your own money you're getting back. You're giving the government an interest-free loan, while getting a zero rate of return on your money. It's fast and easy to adjust your withholding, immediately increasing your monthly cash flow (in some cases by hundreds of dollars a month), and you could then use those dollars to fund your B.O.Y.

6. Make lifestyle changes
Perhaps you can start your first plan by holding onto your car a few years longer than you normally would and holding off on buying a new one. It's also easy to cut monthly costs by simple changes like eating out less, and bundling internet, cable and phone services.

7. Convert existing life insurance policies
Transferring cash value from existing policies may be an option whether you have whole life policies, universal life policies, variable life policies, or certain other types of life insurance as well. In some situations, taking a withdrawal from the old policy and using that to fund a B.O.Y. plan may be an option. And, in some cases, it can work in your favor to give up term insurance policies that will ultimately become too expensive to keep, and direct those premiums into a B.O.Y. plan. You may even end up with a similar or larger death benefit this way.

8. Manage your home equity wisely
Many people like the feeling of security that comes with building up equity in their home, or owning it free and clear. Some people make extra mortgage payments, or refinance to a 15-year mortgage, even if it makes them feel financially pinched. But these strategies are severely flawed.

There are hidden dangers to the belief that you can't have too much equity in your home.

• Payments of principal you make into your home do not make money for you 
• The equity in your home is not liquid 
• The equity in your home is not guaranteed 
• There is no tax benefit to having equity in your home

Unfortunately, most people never discuss these pitfalls until it's too late.

You may find that you can restructure your mortgage, or stop making extra payments of principal, and free up more seed money to help your Bank On Yourself plan, so you can move closer to a secure financial future.

This is not to suggest that you use your home equity to directly finance your lifestyle, or that you use your home as an ATM, as its' been referred to in recent years. This will not get you the desired result. But if you put those dollars into a B.O.Y. plan, you can then borrow your equity in the plan to buy things the Spend and Grow Wealthy way, paying your loans back to your plan, so you recapture those costs. In the process, you can use those recaptured dollars to fund a worry-free retirement.