Black Tax: What it is and How to Handle it

Almost every young working adult might have paid black tax at some point in their lives most especially in Africa. Investopedia defines Black Tax as “...the financial burden borne by Black people who have achieved a level of success and who provide support to less financially secure family members.”

Interestingly, other parts of the world still practice some form of black tax or another. For example, in some Asian cultures, it is common for adult children to financially support their parents in their old age. This is known as "filial piety" and can be seen as a cultural version of black tax. Similarly, in some Latin American cultures, it is common for individuals to provide financial support to their extended families.

As noble as paying black tax could be, there are some circumstances where this culture has put some people in tricky financial situations. Some have been overwhelmed by the financial strain which has limited their ability to invest in their own future.

But what is black tax and how do you handle it? This will be discussed in article, let's dive in. 

What is black tax?

Let’s start from the top. What exactly is black tax?

As mentioned earlier, black tax is a term that refers to the financial responsibility that Black individuals and families often feel towards their extended family and community. This can include things like providing financial support to parents, siblings, and other family members, paying for education and living expenses for younger family members, or contributing to community projects and organizations.

It is often seen as a way for individuals to give back to their community and support those around them, but it can also create financial strain and limit an individual's ability to save and invest in their own future. It's important to find a balance between supporting your loved ones and taking care of your own financial well-being.

The origin of black tax is rooted in historical and systemic inequality that was prevalent at the time. 

The history of black tax can be traced back to the legacy of apartheid in South Africa, which ended in the 1990s. During the apartheid era, Black individuals and families were denied access to many economic opportunities and resources, and as a result, they often relied on the support of extended family and community members to make ends meet.

When apartheid ended, many Black individuals and families gained access to new economic opportunities and were able to improve their financial situations. However, they continued to feel a sense of responsibility towards their extended family and community, and this financial obligation became known as "black tax."

How to handle black tax

Now that you know what is black tax, let’s show you how to handle it.

1. Have a budget: You can set a specific amount aside for black tax. This will help you to spend within the limits of what you’ve set aside for the purpose of catering for family needs or emergencies.  
   
   When you keep a budget you have a clear figure in your mind as well as a clearly defined spending threshold. However, it does require discipline to stick to your budget. 
    
2. Set up automatic savings: One of the things that can happen when you pay black tax is that sometimes you don't have money left aside for savings or investments. So setting up an automatic savings plan makes it easy for you to save. This is because you automatically save first before any money is spent as black tax. 
   
   On the Bitnob app, you can use the bitcoin savings feature to automatically save in bitcoin. You can set the amount you want to save and the frequency you want to save. You can save everyday, every week, or every month depending on the level of frequency you want to save. Get started with Bitnob here.
    
3. Set clear boundaries: It's important to be clear about what you are and are unwilling to contribute. This can mean setting limits on the amount of financial support you provide or suggesting alternative ways to help, such as offering to help with non-financial tasks like babysitting or running errands. 
    
4. Be open and honest about your financial condition: It can be helpful to have a frank discussion with your family about your financial situation and what you are and are not able to contribute. 
   
   Be honest about your own financial goals and limitations, and encourage your family to have a similar conversation with you about their own financial situation and needs.

Are you ready to deal with black tax the right way?

Black tax has a long history that is tied to a lot of cultures. If you didn’t know what black tax was before reading this article, it is likely you might have been unconsciously practicing it for years. 

Now that you know what it is, you can properly handle black tax while also working on improving your finances without offending members of your family. 

Handling black tax requires you to develop good personal finance habits and set boundaries. It will be hard at first but it is an important skill to have. Afterward, your family will realize that you can do so much more for them if you’re in a better financial position yourself.