2024 has kicked off and many of us have ventured into the world, armed with financial resolutions to guide us through the year, or through the month. However, the more things change, the more things stay the same. Siblings will need money for data or school, there may be a family emergency, and we start to get those random middle-of-the-month messages from people we haven’t spoken to in a while. We call it “billing” online but we’re actually talking about Black Tax.
Fun Fact: The term “Black Tax” originated in South Africa to describe the financial responsibilities one has towards immediate family, and sometimes even friends and acquaintances.
The roots of black tax run deep, stemming from the age-old practice of migration for greener pastures, what we also refer to online as “Japa”. People pack their bags in pursuit of a better future, and as soon as they settle abroad somewhat, families back home start waving “financial assistance” flags. Black tax is not just a diaspora thing anymore; it has evolved into a monthly ritual for young, gainfully employed individuals living their best lives in prime locations.
Even John Mikel Obi, the former captain of the Nigerian Super Eagles, spilled the tea on black tax in a recent Vibe with Five podcast. His take on this struck a chord with the Nigerian middle class, highlighting how widespread this is.
You have all these relatives, cousins, whatever. You get a salary and say, ‘I’ll put this aside for this person, put that aside for that person, and put that aside for my mum and dad’. Before you know it, you are getting less than them. That is the culture. They expect you to do that. For them, you owe them.– Mikel
How Much Black Tax Do We Pay?
Now, let’s talk numbers. According to Piggyvest’s 2023 savings report, a whopping 56% of income earners are on the black tax payroll every month, while 27% pay only when they feel like it. If you’re curious about the income breakdown, 71% of respondents earn around ₦249,000, leaving only 29% in the above-₦250,000 club.
When we think of Black Tax, we think of it like this;
Black tax is reflective of the communal bonds within African and diasporic communities. Assisting family in this capacity thrives on the understanding that success and prosperity are not individual achievements but collective triumphs. It’s an unspoken agreement, once you get a job or start making money, you’re expected and even demanded to assist.
On one hand, being the provider for the family is and can be a source of immense pride, showing one’s success, stability, and commitment to our family’s well-being. On the other hand, it’s a significant financial burden that can throw a curveball into personal financial goals. The tension between achieving individual aspirations and fulfilling familial obligations creates a unique struggle, forcing people to navigate this tricky terrain of personal success against financial responsibilities.
Black tax can affect our ability to save, invest, or pursue personal goals. The financial strain extends beyond even planned monthly contributions; it can stretch into long-term plans, hindering wealth accumulation and potentially extending financial dependency. Breaking free black tax requires a strategic approach to managing finances, striking a balance between familial duty and personal financial growth.
Managing the expectations of both family members and societal norms is a delicate dance. It involves more than just shuffling numbers on a balance sheet; it requires open communication, setting clear boundaries, and finding a balance that works for both individual and family.
Planning for Black Tax
Here are some tips on including these expenses in your finances and (hopefully) reducing financial stress;
1. Understand Your Financial Situation:
Calculate your income, expenses, and any existing financial commitments. Understand your savings, investments, and debt obligations. This will serve as a foundation for your financial planning.
2. Establish Clear Goals:
Define both short-term and long-term financial goals. These could include creating a savings plan for emergencies, investing for the future, and budgeting for personal aspirations. Having well-defined goals will guide your financial decisions and help you prioritize where your money should go.
3. Create a Realistic Budget:
Develop a detailed budget that encompasses all aspects of your financial life. Allocate specific amounts for necessities, savings, investments, and discretionary spending. Ensure that your budget is realistic and flexible, allowing room for unexpected expenses or changes in circumstances.
4. Separate Black Tax from Personal Budget:
Consider creating a separate budget or account specifically for black tax obligations. This separation can help you maintain clarity about your personal financial goals and prevent them from being overshadowed by responsibilities.
5. Communicate Openly and Set Boundaries:
At some point, you’ll have to speak with your family about your financial situation and goals. Discuss the expectations and limitations you are setting for yourself. Being transparent about your capacity to contribute will help manage expectations and avoid financial strain.
6. Review and Adjust Regularly:
Finally, regularly review your financial plan and make adjustments as needed. Life circumstances, income changes, and family dynamics evolve, so your financial plan should be flexible and adaptable to ensure ongoing success.
Remember, planning for black tax is not about avoiding responsibilities but managing them in a way that promotes your financial well-being and your ability to support your family effectively.