Understanding Black Tax: A Financial Burden or a Way of Life?

Have you ever heard of black tax? For many Africans, this concept is all too familiar. It refers to the financial support employed individuals, especially those in urban areas or working abroad, are expected to provide to their extended families back home. This unspoken financial obligation to provide for extended family members may involve covering education fees, household expenses, medical bills, or other basic needs. While this practice is rooted in the African values of supporting one another, it often comes with financial strain and anxiety. 

For Africans working in the Middle East, black tax can become a major financial responsibility, as remittances sent home make a significant difference in the livelihoods of family members. However, it can also create a conflict between supporting your loved ones and building wealth.

Why is Black Tax So Common?

Before you villainise it, try to understand why it's so important.

African societies value the idea of taking care of each other. This means that you are expected to contribute to the overall well-being of your family. Therefore, your success is seen as a success for the whole family. So once you “make it” or get out of the block, you are expected to help those you leave behind. This is especially true if the community contributed to your education or even used their "connections" to get you the job.

Additionally, hard economic times as well as high levels of unemployment and poverty in many regions, make black tax a necessity for many families. Those who can find stable, well-paying jobs abroad, especially in the Middle East, are often seen as lifelines for families left behind.

The lack of proper retirement planning or inadequate pension benefits ensures that older family members depend heavily on the financial help of their relatives abroad to survive. While black tax is born from a place of love and responsibility, it can also have a significant impact on the financial health of those who are contributing.

The Financial Impact of Black Tax

1. Delayed Personal Goals

One of the main issues with black taxes is that they often force individuals to put their financial goals on hold. Saving for a home, investing in retirement, or even starting a business might take a backseat to family needs. Over time, this might get in the way of financial growth. 

2. Increased Financial Pressure

If you are already dealing with the challenges of adjusting to new environments, managing debt, or facing job insecurity, adding black tax increases the financial pressure. Your income is not infinite, which means it can only cover a finite amount of expenses. Having to pick what family expenses to prioritise can be extremely stressful. 

3. Strain on Personal Relationships

Black tax comes from a place of love, duty and responsibility, but it can also create tension and foster resentment. Family members may have high expectations for how much you can contribute and pressure you to meet those demands. Additionally, constantly providing financial support can cause frustration, especially when it strains your income.

Managing Black Tax

Though black tax is often unavoidable, it doesn’t have to derail your financial goals. Here are some practical tips to manage it responsibly.

1. Boundaries! Boundaries! Boundaries! 

Even though taking care of the family is unavoidable, it’s essential to identify who is eligible for assistance and how much you can contribute to their well-being. Not everyone should get a piece of your pie, otherwise, there won't be any left for you. Try to help where help is needed or where it will have the most impact. 

2. Create a Black Tax Budget

Essentially think of it as a donation. This will reduce the pressure and expectations. There are some Budgeting rules such as the 70/20/10 that make a provision for donations which can otherwise be used to cater to extended family.  Budgeting is crucial when managing black tax. You can allocate part of your income for family support, but ensure it doesn’t consume your entire paycheck. Prioritize your financial needs, such as paying off debt, saving for emergencies, and investing for retirement. Whatever is left can be used for remittances. Remember, open and honest communication is key to managing expectations. Let your family know that while you want to help, you also need to work on your future.

3. Encourage Financial Independence

There is a big difference between helping and enabling. Providing financial support to people who can cater to their needs but instead choose to stay home and rely on you can cause dependency and resentment. While supporting your family is important, teaching them financial literacy is also valuable. Encourage them to become self-sufficient by starting a small business or saving for expenses. This can gradually ease the financial pressure on you.

4. Plan for the Long-Term

Build an emergency fund specifically for black tax to avoid being caught off guard by sudden requests for financial help. This will include medical emergencies, burial contributions, sudden contributions and more. Planning for the long term helps ensure you won’t be left struggling when family emergencies arise.

5. Learn To Say No When Necessary

No is an essential word when it comes to finances. It might be hard to say but, there are times when you may need to prioritize your financial security. It’s okay to turn down requests for money if it means safeguarding your future.

Find A Balance

Black tax is a reality for many Africans working abroad, especially in regions like the Middle East. While it is rooted in cultural values of family support and responsibility, it can place significant financial strain on individuals. By setting boundaries, creating a budget, encouraging financial independence, and planning for the long term, you can manage black tax without sacrificing your financial stability.

At the end of the day, it’s all about balance—supporting your loved ones while ensuring you also take care of your financial health.