Lifestyle
Personal Finance: How To Overcome Black Tax And Grow Generational Wealth
Getting the opportunity to grow generational wealth is a great responsibility. However, it’s also a difficult task for most black families. This is because of multiple factors including the volatile state of the economy, increasing cost of living, and Black tax duties often placed upon successful young people. With such millstones around their necks, younger Black people find it difficult to create generational wealth. However, it’s not all entirely hopeless. Even with how things are, people can still get started on a journey to create generational wealth. This wealth is passed down to children and helps them get a leg up in life without having to struggle.
Overcoming Black tax
More young Black people are realising the precarious balance needed when helping relatives in need and catering to their own needs. The black tax creates a bigger burden for people because many Black families don’t have generational wealth to fall back on. When you decide to embark on a journey to build generational wealth, it’s important to make some changes to how you and your family will deal with Black tax. Generational wealth can help descendants avoid the pitfalls of having to rely on or provide Black tax.
When addressing Black tax duties, the first thing to consider is how this will affect your finances. If you reduce how much you spend on helping family members, that can help contribute to your savings. But what are the steps to take when overcoming black tax? Dealing With The ‘Black Tax’
Family Finances: Elsa Majimbo, Black Tax And The Children Who Don’t Want To Pay It
1. Prioritize financial goals
When building wealth, it’s important to be ruthless when culling extra expenses. Your goals should be the priority rather than redistributing your earnings. When you know what you want to accomplish, this makes it easier to know where to make cuts and plan your budget. 6 Financial Goals That You Should Work Towards
2. Set firm boundaries
This helps relatives only reach out to you when they need help and not when they want you to fund luxuries. If you want to focus on generating wealth, it’s important to stop any leaks in your savings. Firmly but politely let family members know that you won’t be helping them outside of essentials. If you can share the Black tax burden with other successful family members, this can help you save and invest more. Don’t let family members know how much you earn or how much you spend on your immediate family. This reduces any ammunition they have to guilt-trip you or meddle in your budgeting. 6 Tips On Setting Financial Boundaries With Family
3. Come up with better-helping plans
Discuss with successful family members how you can come together to help those in need. You can all decide to have a kitty or use amenities like SACCOs or family welfare insurance to help with larger emergencies.
Families And Finances: The Problem With Black Tax
Where to start when building generational wealth
Once you’ve reduced how much you spend on Black tax, this can help you have a better budget to start building generational wealth. You don’t need to be financially well-off to start this for yourself and your children. But it does require financial discipline. If you’re in a lower income bracket, you may need to cut back even more on non-essential expenses.
1. Get a retirement plan
If you work in a corporate position, ensure you’re signed up for retirement or pension schemes that are available. If you’re a business owner or self-employed, research the best retirement savings plans availed by insurance companies or banks. The younger you are when you start this, the more money you’ll have by the time you reach retirement age. Compound interest will help the money you square away help you have a high quality of life when you reach retirement age. It’s also a great nest egg to have that you can pass down to your children, or other dependents. Finances: Essential Retirement Moves To Make In Your 20’s And 30’s
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2. Open up about generational wealth
For many African families, talking about wealth appears taboo and disrespectful. Asking your parents if they have a will can be considered invasive. Some parents can even wonder if you’re wishing them ill. However, these attitudes aren’t helpful. When you start building generational wealth, it’s important to explain this practice to your children and other dependents when they’re of age. Your children can also gain an appreciation for savings and will be less stressed when they become adults because they know they have safety nets that they can use for future investments or to fund their education.
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3. Choose which approach is best for you
Younger people can afford to take more risks especially if they have a smaller or no family and fewer expenses. When you’re older, with children already in higher education, varied investments, and more expenses, your investment plans should be low-risk. In addition, look at your debt, assets, retirement plans, savings, and whatever you have that’s building your money. A financial plan helps you figure out the best way forward. For instance, if you already have a sizeable estate, you need an estate plan. If you’re not earning a lot of money, you can choose to invest in a life insurance policy. You can also select a trusted person to be the executor of your estate. Your executor will also help you execute your estate plan if you’re incapacitated or deceased.
4. Life insurance
This is a great tax-free benefit that helps your descendants when you die. This is a great option if you aren’t able to grow wealth from investments or acquiring assets. Life insurance is also a safe option for your beneficiaries to grow wealth if you can’t. Ensure you are consistent with payments. Choose wisely when selecting a life insurance policy for your family to ensure they can access the benefits and possibly start investing those funds. 9 Important Questions You Need To Ask Your Agent Before Getting An Insurance Policy
5. Start saving
No matter your financial state, if you have an income, try to start saving as soon as you can. When you’ve accrued enough funds, start making small investments until you earn enough to start making larger investments for larger rewards. Growing Wealth: The Best Ways To Invest As A Beginner
How to protect generational wealth
Start by ensuring your beneficiaries have financial literacy. This prevents rash decisions like gambling or failing to manage debt appropriately. In addition, it’s important to have frank discussions about the transfer of assets. This prevents friction and legal fights between family members. It also ensures everyone can get access to their fair share without protracted court battles. The most important thing to remember is that your family is better off knowledgeable about generational wealth, how to grow it, and how to protect it.
Check out:
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Dealing With ‘Black Tax’ Part 2: Building Generational Wealth To Break The Black Tax Cycle
Family: Dealing With Emotional Black Tax
How To Handle Financial Stress During An Economic Crisis (Like The One Happening Right Now)
Family Finances: Elsa Majimbo, Black Tax And The Children Who Don’t Want To Pay It