What is the Black Tax?
Simply put, the black tax refers to a situation where your income is not only expected to cater for you and your immediate family, but it’s also expected to cater for your parents, siblings, extended family, close friends, and acquaintances alike. The black tax is the major reason most people can’t meet up with their financial goals. It’s like an invisible rope that holds you back, preventing you from crossing the threshold to success. It has become so familiar, especially to Nigerians and Africans at large, that we hardly even realize that things shouldn’t be that way.
The black tax is common across African cultures because of how blood ties and families are structured. Once you begin to earn a reasonable size of income, you’re automatically expected to take care of your family and you’re also expected to stretch your finances until all responsibilities are met. It is called the Black Tax, because it is most common in African cultures, although it’s not limited to Africans.
The Problem with Black Tax
It’s not a problem to want to be there for your friends and family as much as you can. It’s only you caring in the best way you know how. But the problem with black tax is that it puts you in a sandwich position. You’re stuck between a rock and a hard place and you have to provide for both parties. You’re literally providing for two generations- your parents or older relatives, and your siblings, children, or young family. Not only are you providing for them, but all your resources suddenly become highly needed. These resources include; your time, attention, care, finances, and emotional support.
If you fail to properly manage the black tax, then you’ll just find out that there’s a huge drain in your finances. No matter how much you’ll earn, you won’t be able to account for your finances, and your investment plans will remain just that- plans. Once you start earning, you stay in the generation in the middle and you have to account to two generations as previously mentioned. This means you’ll find it hard to save for your own future, because you’ll have spent all your money on the black tax. So, what happens? When you get old and retire, you’ll have had nothing saved, and become forced to rely on your children who are just starting their families. And so, the cycle continues. For most of us, we are left to watch as our financial goals continually disappear down the drain called the black tax, and we don’t know what to do about it.
How do you recognize if you’re living above your means? Ask yourself these questions and your answers determine your diagnosis.
- Are you saving less than five percent of your salary?
- Are you spending more than 30 percent of your salary on a loan?
- Do you have unmanageable debt?
- Do you spend more on your car than on your rent?
By providing honest answers to these questions, you’ll finally understand why your finances aren’t growing like you hoped.
How to Beat the Black Tax
Obviously, there’s a huge problem that cannot go on. How can one beat the black tax and break the cycle of poverty and struggles? Well, it starts with knowing your circle of responsibility. Someone once said, “If you did not give birth to them, and they didn’t give birth to you, then you’re not responsible for them.” At least, primarily, you’re not. Naturally, you may be required to help and offer your assistance every once in a while, but by understanding your primary circle of responsibility, you’re no longer obligated to help even when you cannot afford to.
Having the money right now does not mean you can afford to always offer your assistance. This is why the second step to beating the black tax is to understand your means. Running out of money a few days after offering your assistance simply shows that you never had the means to offer that assistance in the first place. Have you ever looked back and wished you could undo a help you did because of how hungry you felt in that moment? Well, that’s a sad indication that you should never have helped. It doesn’t make you a bad person. Neither does it make you evil or callous. All it means is that you understand your means and you also understand what you can afford. Most people make the mistake of defining their means based on what they have in their accounts in that particular period of time, but that’s wrong because most times, the money you think you have has already been accounted for by other expenses you failed to recognize.
If you truly want to understand your means and know if you can afford to assist, then you’ll need to weigh your means. What is left after you deduct all existing bills, debts, daily expenses, and even investments? There. You have your answer.