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Pay Down Your Debt Challenge

Find an Extra $1,000 for Debt

Follow these cash-flow tips and use the newfound money to pay down your debt fast

Adjust Your Withholdings at Work
If you're working and you routinely receive a big income tax refund check from the government each year, stop waiting to get what's rightfully due you and collect some of that money now. According to the IRS, the average tax refund check in 2011 exceeded $3,000.

If you're among the millions of Americans who receive tax refunds, you're giving the government an interest-free loan. To correct that situation, and to stake an immediate claim to your funds, simply go to your human resources office at work and adjust your W-4 withholdings. This will cause your employer to take fewer dollars out of your paycheck.

Once you adjust your withholdings, your very next paycheck will have more cash in it. If you normally get a refund of around $3,000 a year, expect to receive about $250 a month extra in your payroll check.

Consult IRS publications 505 and 919 at to learn how to properly adjust your withholdings so that you don't take out too much money and end up owing taxes.

Squeeze Money From Your Residence
Whether you rent or own, getting a roommate or housemate is another way to generate income. If you can live with having an extra person around, you'll likely find takers willing to lease out a spare bedroom or space in your attic or basement. Lots of people who've been foreclosed upon or who can't get a mortgage for their own property might be especially willing to rent.

Taking in a roommate will provide you with extra cash to pay toward your debts. However, before forging ahead if you are a renter, be sure you're not violating any clauses in your rental contract by letting someone else live with you.

Save Money by Kicking Bad Habits
If you have a habit that's hurting you, financially or health-wise, kicking that habit could improve your economic situation.

Take cigarettes, for instance. The average pack of cigarettes costs roughly $4, excluding state taxes. If you smoke two packs a day, that adds up to $10 daily (taxes included). Do your best to rid yourself of that bad habit. If you can, you'll save $300 dollars a month or $3,600 dollars a year, not to mention the savings you'll reap from fewer medical bills.

Return a Recent Purchase
Are you in a financial bind because you've overspent? If you did a little too much shopping recently [link to don't spend/don't have story], that could be adding to your cash flow problems.

Rather than going to a payday lender, head straight back to the retail store or establishment where you recently made a purchase, return the merchandise you bought and get a refund. Then take the money you receive and apply it toward your debts.

As you can see, there are lots of creative ways to raise $1,000 or more in a month or less. You're limited only by your imagination and your willingness to become quickly debt free.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. You can follow her on Twitter and on Facebook.

You may also like: 12 ways to avoid impulse shopping. >>

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