Black tax is a South African term that is now widely used around the world. It refers to the fact that many Africans have to figure out how to use the little money they earn to support themselves, their immediate family, and their extended family.
Black tax and wealth building can seem like two ideas that can’t go together. People who have had to pay this tax can tell you that it makes it very hard to save money and invest for the future, especially compared to people who don’t have to pay this tax.

Yet, the black tax can be a great way to empower family members to become financially independent if handled with a carefully planned strategy. Various studies show that the black tax, which is meant to be a compassionate act of generosity, is often abused. The results are financial stress, broken relationships, and generational poverty.

This guide will teach you everything you need about the black tax and how to make it a story with a beautiful ending. 

Challenges With Black Tax and Building Wealth

The Role of Government

The lack of infrastructure in Africa is a crucial factor contributing to our poverty. Basics like pensions, employment, social security, accessible or affordable healthcare, free education, good roads, reliable electricity and clean water supplies are all essentials that governments struggle to provide. The money you give to help your family back home is to provide what most African governments won’t deliver.

Inequality in The Workplace

Being black and trying to make it as an adult in Europe or the United States already puts you at a significant disadvantage. Even with a college degree, it is harder for black people to get well-paying jobs.
According to a 2021 article published by LSE, Ethnic minorities are less likely to find good work than their white British counterparts, even when born and educated in the UK.

It took me a while, but I got a job at a UK bank. I excelled at my job but getting a promotion or a pay raise was hard, even though my boss gave me good reviews. After a few years on the job, I applied for a manager position. My boss laughed at my application and said he never imagined me in that role despite me being one of his top salespeople.

Family Structures

According to ONS UK research, black people have the most significant rate of single-parent homes (62%). This results in a single income or, in certain situations, no pay. A single-parent household hardly has enough income, and there are still great expectations of sharing their little money.

False Impression of What it Means to Live Abroad

Because few of your relatives have ever visited Europe or the United States, they have no idea how things work. “Wow, he earns a cool £1000 every month. That’s N900,000 in Nigerian currency. He is enjoying o”! But in actuality, a monthly salary of £1000 in a place like London is considered extreme poverty.

The average monthly rent is more than £1000. Aside from the currency exchange rate, many people are ignorant of the actual cost of living in the west. Demand for money begins the moment you leave the shores and, in most cases, before you even land a job.

So, on the one hand, it’s hard to find good jobs that pay well, the cost of living is very high, we have to take care of our immediate families, and many of us are single-income families. On the other hand, our extended family members are always asking for money. It’s no wonder that black people have a hard time building wealth.

Is Black Tax Sustainable

The short answer is no. Nor should it be. The black tax lifts people out of poverty rather than sustains a relative’s daily living. Giving money to family members to live on is not sustainable in the long run. It is a barrier to your prosperity and a definite way to fail to meet your financial goals.

My Experience with Black Tax

I’ve seen the negative impact of the Black tax with my dad and myself.
My dad went above and above to assist his extended family. He was generous with the little he had. His kindness attracted a vast number of needy relatives. It affected his ability to provide for his kids adequately.

Dad was still alive when I returned to the UK. I sent him money, but the needs of his extended family depleted everything I sent him. Dad could not accomplish the critical financial goal of paying for my siblings’ education or meeting his basic needs like food and healthcare.

He was financially stressed and died whilst my siblings were still very young and needed education. I had to step in even though I had my own family. He never planned for me to pay for my siblings’ education. There was no plan.
If I could start over, I would do the following.

Black Tax Can Be A Success Story

Have a Plan

People do not plan to fail, but people fail to plan

It’s easy to see why we struggled financially as a family. We had minimal resources, and we wanted to help everyone. A good plan should start with who to help, when and why. Focus on the neediest who cannot fend for themselves, like aged parents, grandparents and young siblings who need to complete their education. You cannot help everyone. Attempts to help everyone will accomplish nothing.

Prioritise Investing in Income Generating Assets

There are a lot of income-generating assets besides real estate, but if you can afford to invest in real estate, go for it. It will bring in stable long-term income.

Consider investing in less capital-intensive assets—for instance, vehicles—tricycles, drilling boreholes to provide water, food process/milling machines etc. Every community is different; what services can be provided in exchange for money in your community?

Assist your family by shifting their perspective from consumerism to creators of goods and services.
Sensitively encourage them to recognise the advantages of delaying gratification.

Be Clear About How Much You Can Help

Pretending that you are doing better financially than you are will only backfire on you. Your family’s demands will be proportional to how well-off they believe you are. This is the one time to downplay your money accomplishments, making your limitations clear and managing their expectations.

Explain Why You Give

Remember that you are helping the family become financially independent over the long term. Remind them why you give and what you want to get out of it. Try to get everyone in the family to work together instead of each member trying to get what they want. “Every man for himself” is costly, wastes resources, and makes it less likely that anything important will get done.

Even if you pay for the place they live and the food they eat, relatives may be upset with you because they feel you aren’t meeting their particular needs. “You gave her money; what about me?” They never stop to think that everything comes from just one person’s pocket. Don’t fall for it; think about the family as a whole.

Teach Them Money Management

Help your family make a budget, save money, and live within what they can afford.
I’ll be the first to say that this is hard in most cultures, especially African ones. “How dare you tell me how to live my life just because you give me money?”

My African mother will tell me to put my ideas and money where the sun doesn’t shine. Never give up; explain to them that money management is something all wealthy people do. They should try if they wish to be wealthy.

Our culture and traditions can significantly affect people’s ability to live within their means. A “this is how we’ve always done it” mindset will make budgeting difficult.
It’s your job to help change minds and hearts. since you are paying for everything, You get a say, so don’t be afraid to question long-held beliefs and practices.

You can change people’s minds, but you must be culturally sensitive and respectful. Don’t pound your fist on the table and demand everyone begins budgeting. Instead, offer a lovely vision of what the future may be like if money were better managed. Perhaps you can share this blog on How Do You Start Managing Money with your family.

Asset Maintenance

If you’ve bought income-generating assets for your family, make it clear whose job it is to maintain them. Just so we are clear, they are, not you. They should be good stewards and put money aside for the asset’s upkeep. Normal wear and tear is something they should expect and prepare for.

I’ve seen situations where family members get the rent money, spend all of it, and then call their sponsor when something goes wrong. If the sponsor doesn’t give money to fix the problem, these relatives are happy to walk away from the investment. Make it clear from the start that it is their responsibility to take care of assets.

Learn to Say No

What I dislike most about The black tax is the feeling of entitlement to my income. I have family members who believe their every request is for me to grant. Managing expectations and establishing boundaries early on would have made my life easier.

A close relative will phone me at 3 a.m. to demand money. She calls that early to guarantee me been home, notwithstanding the inconvenience. After years of putting up with this crap, I finally said no to all demands. They’ve since disappeared from my life, which tells me one thing; they never cared about me; the only relationship we had resolved around me supplying cash.
It’s great to be liked, which is why we sometimes commit to things we can’t honestly afford but never buy people’s love. Help when you can, and say no when you can’t. “No” is the most liberating word in the English language. Say no more often. 

Set Deadlines and Hold People Accountable

If you agree to pay for a project, be specific about how long you can assist and when you want outcomes, such as a student’s report at the end of the school year. You pay the bills, and there should be evidence of progress.

Abby’s story

Abby was the oldest sibling who struggled to make ends meet. She wished that her younger sister Bola finish her university education. They attempted a low-cost university, but Bola failed the entrance exam and went to an expensive private university. Abby struggled to pay her sister’s tuition, but her love for her sister kept her going. Things went wrong. Bola did not do well in school, nor did she finish. Abby threw away all of that money without getting anything in return. It hurt their relationship, too.

Where did Abby go wrong?

Abby was off-base from the get-go. She’s generous and kind and wanted her sister to go to college, but she just wasn’t motivated enough to do the necessary work. The sister would have worked harder if she had been enthusiastic about it.

Put Yourself First

A Yoruba saying that “if you and your child are simultaneously in danger, sort yourself out first and then attend to your child”. Apply this principle to your finances. Get professional financial advice through your bank, which is usually free.

Understand the principle of paying yourself first by putting money aside for your future. Commit to carefully planning your income and saving for emergencies. An emergency fund should contain three to six months of living expenses.

Avoid going into debt to accommodate the demands of others. You don’t want to become a burden to your children, continuing the cycle of dependency. Set a cap for the black tax in your budget and stick to it.

Manage Your Expectations

Nothing ever goes as planned. People you’ve supported in the past will frequently tell you that you’ve not done enough. They will compare you unfavourably to people who they believe have performed much better than you.
Expect and accept it; you did your best with the little you had. Pat yourself on the back and carry on with your life happily.

Final Thoughts

There are two camps on The Black Tax: those who believe it is beautiful and those who think it is the worst idea ever.
I belong to the first group despite my father’s efforts being a complete failure. The black tax worked better in my case because I learned lessons from my dad and saw how he struggled to the end.

My children, nieces and nephews will never be required to pay the black tax. The black tax should be a short-term financial solution. If you have to pay, make it work by following these five steps.

1. Take responsibility for your economic well-being and pay yourself first.
2. Spend what you can genuinely afford.
3. Have a strategy that emphasises self-empowerment over consumerism.
4. Share your vision with your family.
5. Assist only those who are willing to assist themselves

 Thanks for taking the time to read. 

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