How to pay 'Black tax' and still be financially prudent

How to pay 'Black tax' and still be financially prudent

‘Black tax’ can be debilitating. Especially for first-earners. When you’re the first person or one of the few in your family who is earning considerably more cash than the rest, sometimes you stop becoming a person but a walking ATM machine.

There’s absolutely nothing wrong with helping out family/friends who have come upon hard times and or face economic hardship.However, in the wider conversation about building generational wealth and strong financial communities, it is crucial that we address how ‘black tax’ weighs on the earner.

I came across this post on Linkedin, sharing how a user’s mom sold home-made-yogurt and hot tea to fund his and his siblings' education. Both he and his brother now work at Paystack and Google, making great money. A lot of young African’s find themselves in that sort of dynamic. 

Family and friends (who may not have had access to certain opportunities) play central roles in sacrificing so that children are educated and able to grow up and sustain themselves,and by extension their families. In a lot of cases individuals are happy to support those who helped them. In other situations people aren’t able to support,  and their  families  become adamant in demanding help. When you’re not prepared for it, it can have a crippling effect on your finances. 

Black tax is not an individual issue, it’s a community one, that’s not going away anytime soon.  Here are a couple of tips on how to better manage it:

  1. Don’t spoon feed

There is a huge difference between giving back to people who assisted you,  versus financing the lives of able-bodied people who feel entitled to your hard-earned money without necessarily having (or wanting) a relationship with you.  Give enough but have a limit. 

  1. Pay yourself first

Don’t forget that you have to live too. Black tax has a way of guilting you for putting yourself first when others might need it ‘more’. While this may be true,  don’t forget that you have a journey too. Make sure that you’re allocating money to your savings, investing and retirement in the way you need to and giving where you can. 

  1. Give but also teach

Majority of people who pay black tax are usually better educated and more exposed to managing personal finances. When you give money back to your family/friends/community don’t be shy with your knowledge. If you have some tips on saving, investing and budgeting, share them with your community and encourage them to preserve where they can. This is how people will become more sustainable and it also established that you're here to help and not aid.

  1. Include it and account

If you have money going out every month towards something, in this case black tax,  it’s important to plan for it. Know how much you’re spending on giving back. You may not want to look at the numbers but it’s important to face them and account for them in the larger framework of your financial planning. 

Unfortunately for much larger socio-economic and complex reasons, black tax is here to stay for a while, but hopefully some of these tips prove helpful in better managing it. 

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