Meet Tumi, a young professional who recently graduated from university and got a well-paying job. As the eldest child in her family, she is expected to financially support her parents and siblings, as well as contribute to community initiatives. Tumi’s financial responsibilities have become overwhelming, leaving her with little money to invest in her own financial goals. A prime example of the negative impacts of the well acclaimed term – Black Tax.
Tumi’s story is not unique. According to a study conducted by the financial services company Sanlam, nearly 75% of South African households provide financial support to extended family members, with 23% providing support to three or more people.
For many black Africans, the concept of “Black tax” is a familiar and often daunting one. It refers to the financial responsibility that Africans often feel towards their families and communities. While this tradition does have positive aspects, it can create a cycle of financial dependence that is difficult to break and become a significant obstacle to an upwardly mobile person’s financial success. It is therefore crucial to find a balance between fulfilling financial obligations to family and community, and investing in one’s personal financial goals and achieving financial freedom.
In this article, we will explore what the black tax is, its impact on young Africans, and the strategies necessary for overcoming its burden and thriving financially. The knowledge of how to reduce its negative effects so it does not ruin you is worth having!
What is Black Tax?
Black tax refers to the financial responsibility that black people home and abroad often feel towards their families and communities. This responsibility can take many forms, from contributing to household expenses to supporting extended family members with their bills, and even contributing to community initiatives.
It is important to recognise the positive aspects of this tradition. Many black Africans view supporting their families and communities as a source of pride and a way to give back and show gratitude. Black tax can foster a sense of community and create opportunities for mutual support and growth.
It can take many forms and impact individuals and families in different ways. Some may be expected to provide financial support to their parents, siblings, and other relatives. At other times it is to help fund a family occasion like a wedding, birthday party, or funeral. Also contributing to educational expenses for younger family members, and projects in the community that help to elevate more of its members.
In spite of these beneficial effects, we must acknowledge that black tax can be a significant financial burden on the bearer, particularly those struggling to make ends meet themselves. It affects their ability to save, invest and build wealth, amongst other things.
The Origins of Black Tax
The term “Black tax” might be new to you, but the reality of its existence has been a long-standing issue for many black Africans. Its historical and cultural roots are important to understand. Historically, black Africans have faced systemic barriers to wealth creation, such as discrimination in education and employment opportunities. As a result, many of them relied on their families and communities for support, leading to a tradition of reciprocity and mutual aid.
Black tax can be traced back to the apartheid era in South Africa when black Africans were subjected to systemic oppression, exploitation, and discrimination. During that time, they were denied equal access to education, healthcare, and job opportunities, leaving them with limited prospects for upward mobility. This resulted in families relying on the breadwinners to provide for not only their immediate family, but also their extended family members. The responsibility of taking care of aging parents, siblings, cousins, and even distant relatives became a cultural norm.
Today, the legacy of apartheid lingers, even in other African countries such as Nigeria, Ghana, and Kenya, as many continue to bear the burden of financial responsibility for their nuclear and extended families. The fact is, governments in many African countries fail their people by not using their taxes efficiently or appropriately to provide for citizens’ basic needs. Black tax bearers end up paying for those services that should have been provided by the government from the taxes they pay.
The impact of all this on individuals and families cannot be overstated. It is not just a financial issue but a social issue that requires a comprehensive approach. If you are a bearer of the black tax, it is crucial to find a balance between fulfilling these obligations and taking care of your own financial needs and goals.
By recognising the factors contributing to the black tax and acknowledging the specific ways in which it impacts your life, you can take steps towards building wealth and achieving financial freedom while still fulfilling your desired financial responsibilities to your family and community.
Negative Impacts of Black Tax
As has already been inferred, black tax can have a significant and long-term negative impact on an individual’s financial well-being and quality of life. Here are some specific ways in which it can affect your finances and life:
- Reduced disposable income: Supporting extended family members can leave you with little or no disposable income to invest or save for your future.
- Delayed personal goals: Financially supporting family members can make it challenging to prioritise your own goals, such as buying a home, starting a business, or pursuing higher education.
- Strained relationships: The pressure of providing financial assistance to family members can lead to disagreements and in-fighting which can negatively impact those relationships and others. An entitlement mentality expressed by another party further compounds this.
- Mental and emotional stress: Being responsible for the financial well-being of multiple family members can lead to severe mental and emotional stress. This can manifest in various ways including anxiety, depression, or burnout.
- Limited job mobility: One’s job mobility might be limited as he/she may feel compelled to stay in a particular job or location to support their family.
It is crucial to develop strategies to overcome the burden and go on to achieve financial freedom and improve your quality of life.
Overcoming the Burden of Black Tax to thrive financially
Black tax is a complex issue but there are practical strategies that you can use to overcome this societal challenge and achieve financial stability. Here are some of them:
1. Identify and prioritise your financial goals
It’s essential to set financial goals for yourself and prioritise them. This will help you stay focused and motivated, even when faced with the demands of black tax. Your goals might include paying off debt, saving for retirement, or investing in a business venture.
2. Include black tax in your budget
It is an important step to create a budget that takes into account your financial obligations to your family after you have some important things sorted, like an emergency fund for instance. Do an honest assessment of your income and expenses, and then include your black tax contributions. Having a budget will help you prioritise your spending and ensure that you have enough money to meet all of your financial obligations.
An important practice to ensure money is being spent the best way is to conduct the necessity test on each ask – prioritising expenses according to importance and urgency. Also, to prevent the occurrence of bad loans, only give your people amounts you are okay never seeing again.
3. Communicate your financial situation and set boundaries
It’s important to have open and honest communication with your family about your financial situation even if it hurts. Set clear boundaries around what you can and cannot afford to contribute. Say “no” when you cannot afford to spend on something and be firm on it. This may be a difficult conversation, but it’s essential for your financial well-being.
Sometimes, proffering other solutions instead of giving cash works to solve a problem. Empower your people by teaching them to fish instead of giving them fish all the time.
4. Collaborate for success
It is important to not take up the role of a messiah in your friendship and family circle. Accept that you cannot help everyone and you also need some assistance. Wherever possible, collaborate with other members of the family and friends group to empower those in need in the circle. Setting up things like Trust funds, participation in skill empowerment programs, health insurance plans, and the like will help ease the burden off one person.
5. Build a solid support system
It’s crucial to have a support system that understands your situation and supports your financial goals. This can include family members who are also dealing with black tax, friends who can provide emotional support, and even mentors who can offer guidance and advice. Being part of a community of people who work towards the same financial success you seek provides a vital boost for your journey.
6. Explore ways to increase your income and build wealth
One effective way to overcome the burden of black tax is to increase your income. This can be achieved through additional education or training, seeking out better job opportunities, or starting a side business. Building wealth through smart investments can also help you achieve financial freedom. Here are some cool tips to make these happen:
Prioritise education and skill development
Education is a crucial component in improving one’s financial situation. Pursuing higher education or acquiring new skills through training and certifications can help you qualify for better-paying jobs or even start your own business. This can lead to increased income and financial stability.
Invest in your personal and professional growth
Investing in yourself can open up new opportunities for career advancement or entrepreneurship. Attend conferences and workshops, read books and articles, and seek out mentors who can help you develop new skills and knowledge. Very important.
Build multiple streams of income
Relying on a single source of income in the modern day can be risky. Even more so when that income is subject to black tax. Consider developing multiple streams of income to help with cash flow.
Improve your financial literacy
Understanding how money really works and the best ways to manage it and thrive financially is essential! Such education is sorely lacking in our regular school curriculum. Thankfully, technology has made it easier than ever to access financial resources and education. That you are reading this now is a testament to the fact that you are on the right track, learning all that would help you improve your money game.
Take advantage of the tools available to you online and offline. Tools like personal finance books, online courses, podcasts, blogs such as this, personal finance apps, and free financial planning resources to improve your financial literacy and make informed financial decisions.
Don’t do this alone. You can spend some time educating your family members on better ways to handle money and be more financially healthy so as to avoid making costly money mistakes. Reducing their bad financial habits takes some burden off of your income in the long run.
7. Maintain a positive mindset and stay focused on your goals
Overcoming the black tax burden requires some patience, perseverance, and a positive mindset. Make these three Ps your friend. Stay focused on your financial goals and remind yourself of the progress you have made. Celebrate these small successes and don’t be discouraged by setbacks.
If you want to see how a mix of all these strategies can play out in real life, here are a few examples;
How these strategies can work:
Femi is a young adult male who earns a good salary but has been struggling to manage his finances due to the financial demands of his extended family. He decided to develop a budget that takes into account his black tax obligations, allowing him to prioritise his spending and save for his financial goals. By communicating his financial situation with his family and setting relevant boundaries, he was able to manage his finances more effectively. He helped enrol his younger brother Gbenga in an IT skills training program and Gbenga just landed a decent job thanks to the new expertise!
Imani is a single mother who struggled for years to manage her finances due to her black tax obligations. She decided to speak up about it and build a support network of family and friends who understood her situation and could offer support and guidance. She also invested in her education, which helped her secure a higher-paying job and increase her income.
One of the positives of society is that we can help each other when in need, and it is a blessing to be able to provide for another person. But also remember that two broke people aren’t of much use to each other.
A choice to effectively manage your black tax obligation will not only help you do better with your savings and build wealth but also prevent you from becoming dependent on your children later on in life and continuing the vicious cycle. Do yourselves a favour by making the right choices.
In Conclusion
Overcoming the burden of black tax is no small feat. It requires discipline, focus, and a determined willingness to take action toward your financial goals. We have discussed various strategies and tips to help you overcome the negative impacts of the black tax and thrive financially.
To recap, some of the strategies highlighted include identifying and prioritising your financial goals, developing a budget and financial plan that accounts for black tax, and exploring ways to increase your income and build wealth which include prioritising your education and skill development, investing in your personal and professional growth, building multiple streams of income, and improving your financial literacy.
It is important to note that everyone’s situation is unique, and not all strategies may work for everyone. The key is to identify what works best for you and take action toward your financial goals. Remember, this is a journey that will take time, patience, and persistence. But with the right mindset and tools, you can overcome its negative effects and thrive financially.
If you would like some guidance on how to manage your money and black tax situation, do contact us.