‘Black Tax’: Never be too kind, make saving and investing
There is an expectation that if you are African and have a job, you will take care of the wider community needs. This is the so-called ‘Black Tax’.
In a country where rates of poverty are extremely high, this informal system pays medical bills, educates, builds homes and supports the elderly. These are all great things but this unplanned giving is also part of a vicious cycle.
We struggle to create wealth because after we have given to every funeral, wedding, church fundraiser and baby shower there is nothing left to invest or save.
It is a cycle because if I give too much and fail to grow, I will need help to pay my bills. There is an implied social contract that because you gave towards my needs, I will do the same for yours. The social pressure can be overwhelming and whereas community support is one of the best virtues of our culture we need to set limits.
Two weeks into the Centonomy 101 personal finance class and Marion could not hide her shock. In the class, students are required to write down every shilling they spend and in two weeks she had given more than Sh30,000 to members of her extended family.
Majority of the cash had gone to support her parents and in-laws all of whom are below 70 years old. In the same period, she had only made a Sh5,000 contribution to her Sacco. Another student, Esther, echoed her disbelief as she listed the amounts given in two fundraisers and a baby shower with zero savings or investments for the month.
A close relative could be deathly ill and in need of millions for life-saving medical care but you probably would not sell your house to meet the cost. We must do our best to help but must realise that we can’t help everyone because we have limits.
That limit, whether written or not, is called a budget. So rather than bury our heads in the sand let us set those limits in a way that will also allow us to grow.
Take some time and see how much you have spent on average over the last few months giving towards community needs. Once you have an average decide if this is too much or too little and set a monthly limit.
Ensure that the amounts you plan to give also allow you to save and invest for your future. From then, on any requests should fall within that budget. If you don’t give the full amount in one month you can roll it over to the next month or decide to invest the difference.
Please continue to give and continue the great communal African culture but do so in such a way as to allow you to achieve your dreams. The writer is the CEO of [email protected]