How to beat ‘black tax’

Vuk'uzenzele - - General -

You might be a young per­son who has re­cently grad­u­ated from uni­ver­sity or col­lege, your fu­ture is bright and you have landed your first job.

The fruits of your labour are not be­ing fully en­joyed thanks to ‘black tax’. ‘Black tax’ is a col­lo­quial term used to de­scribe young black peo­ple who share their salary with im­me­di­ate and ex­tended fam­ily while try­ing to man­age their own ex­penses.

Chief Fi­nan­cial Of­fi­cer of the Sav­ings In­sti­tute, Ger­ald Mwandim­bira, said a fam­ily may of­ten have one per­son who has grad­u­ated from uni­ver­sity in a well-pay­ing job.

“Black tax sees the per­son’s salary por­tioned off to sup­port older par­ents or an ex­tended fam­ily, while try­ing to raise a young fam­ily.”

“This puts one’s re­spon­si­bil­i­ties in a “sand­wich” and hence this is of­ten called the sand­wich gen­er­a­tion. The sand­wich gen­er­a­tion sup­ports the gen­er­a­tion above them, as well as the gen­er­a­tion be­low. Mak­ing it dif­fi­cult for the sand­wich gen­er­a­tion to save, which will in turn pass this tax down to fu­ture gen­er­a­tions.”

He added that as a con­se­quence of liv­ing above one’s means and sup­port­ing ex­tended fam­ily, the sand­wich gen­er­a­tion has lit­tle or no sav­ings.

There are ways in which one can start beat­ing the black tax. The most im­por­tant of these is to live within your means says Mwandim­bira.

Signs that you are liv­ing above your mea ns:

• You save less than five per­cent of your net salary • You spend more on your car

than your rent

• You spend more than 30 per­cent of your salary on a home loan

• You need an over­draft or

credit card to sur­vive

• You have un­man­age­able

debt.

“Once you know you are liv­ing above your means, you need to ad­just your life­style with a bud­get plan that makes you fi­nan­cially se­cure.”

He said peo­ple who live above their means may also need to man­age their fam­ily’s ex­pec­ta­tions by al­lo­cat­ing what they can spare and also learn­ing to say “no”.

He added that it is im­por­tant to save even while pay­ing off debt.

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