Help me plan to raise Sh3 million to complete my house and repay a Sh2 million loan

My name is Kim. I receive a monthly net salary of Sh330,000. My consulting work brings an average of Sh50,000 to Sh120,000 per month. In a year, the consulting work may average Sh500,000 since I don't actively pursue it. I am servicing a bank loan of Sh65,000, rent of Sh31,500, power Sh2,000, water Sh1,200, airtime and entertainment of Sh6,000, Credit card debt of Sh38,000 which I use for groceries and fuel and random needs/entertainment, and sometimes subscriptions like domains. I service an insurance policy at Sh11,000. I also support our parents with Sh10,000 and charity/church with Sh30,000. I have a goal to finish my house in seven months, which is already roofed and needs about Sh1 million to finish. I also want to clear the bank loan in one year which is currently at a balance of Sh 2 million. How do I do this?

Inziani Khasiani, the executive director at Klientele Kenya

Your total outflows for the bank loan, rent, power, water, airtime/ entertainment, credit card, insurance policy, parents and charity comes to Sh183,700. On the inflows side, we have a salary of Sh330,000 and consulting income of Sh50,000 bringing a total of Sh380,000. The two will result in a surplus of Sh196,300. 

Your financial targets are to fully repay a loan of Sh2 million within 12 months and to raise Sh1,000,000 within seven months to finish your house. In order to repay the loan within 12 months, I recommend increasing the monthly loan repayment amount from the current Sh65,000 to Sh170,000. I also recommend scaling down on the charity budget from Sh30,000 to Sh20,000. The revised outflows will total Sh287,700 after these amendments while the inflow will remain at Sh380,000 leaving a surplus of Sh101,300.

In order to raise Sh1million, I recommend joining a Sacco and pledging a savings of Sh100,000 per month. After seven months, the contribution will be Sh700,000. Using the rule of borrowing three times savings, this contribution will qualify for a loan of Sh2,100,000. The above projections are based on minimum consulting work revenue of Sh50,000 per month. Increased focus on consulting is able to raise up to Sh120,000 per month.  This will result in a surplus position of Sh171,000 per month. Committing Sh170,000 into savings will raise Sh1,119,000 after seven months. There would be no need to borrow to finish constructing the house. 

Nevertheless, the savings would qualify for a loan of Sh3,500,000, and access to this can be considered, provided there is a plan on how the funds will be utilised. At the end of 12 months, without a loan and with a house [and assume no rent], the surplus available will be Sh300,000. An estimated Sh135,000 would move to loan repayment leaving Sh165,000. I recommend that you plow back Sh50,000 into Sacco contributions and another Sh100,000 into the money market for emergencies.

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