There are plenty of obstacles for the middle-class population (whether one is employed, self-employed or an entrepreneur). This includes trying to keep one’s job and not be retrenched for the employed; trying to get clients for the self-employed, and getting funding for the entrepreneur. For many, there’s also an unspoken challenge while trying to build their companies, their career, or their wealth. A common phenomenon that some refer to as the ‘black tax.’
‘Black tax’ (sometimes referred to ‘family responsibility’) can be defined as the extra money that black professionals are expected to give every month to support their less fortunate family and extended family members. It can also be defined, positively, as the duty that the black child has to the family. The burden of a black tax causes financial distress to middle-class professionals as they usually have no savings left after having to share their salaries with the entire family. Building generational wealth becomes more difficult as a result of the black tax.
Black tax, unfortunately, affects the middle and the lower class groups. Families in the upper class hardly need a member of the family to support them. This makes it difficult for one born in the middle or lower class to move up a social class. The tax starts when one is a child. You most likely cannot choose where you are born. A child born in a lower class social standing, who lives in a slum, will most likely go to poor schools with underpaid unmotivated teachers. This will impact the education of this child negatively as opposed to a child born in a rich neighbourhood. Already, the child born in the slums is at a disadvantage, even before he gets a job. If they make it and get a job, or an income from a business, then this child has to support his family.
Black tax is worse for first-borns (or older children) as most of them have to cater for the remaining siblings, sometimes even paying their fees (responsibility for the parents), take care of the parents and sometimes take care of extended members of the family including grandparents, uncles, aunts and even cousins. This with your own family (spouse and children) to take care of. We have seen this with some of our parents, where they used income that could have bettered their lives and that of their children as black tax, and later on, when they were older and needed help, those they helped bailed. The burden then shifts to their children who now have to pay the tax, and the cycle continues.
If you do not pay any form of black tax, then you are lucky. If you do, you need to deal with it so that you can break the cycle and not penalize your children. It would probably be illogical for you to stop paying the black tax, but here are a few things you can do to deal with it:
Choose your battles: You have to be picky about what you can support. Education is important. However, some entertainment costs such as parties or weekend drinks are unnecessary, and you need not support this.
Don’t tell everyone what you earn: Your uncle who expects you to send him money does not need to know how much you earn. He will always use this figure to try to get money from you, without caring whether you have other responsibilities or not.
Set a budget and stick to it: You need to set a certain amount that you can afford to give out in a month and when this money is exhausted, you should not give any more, unless it is an emergency. In the months where you have, for one reason or another, exceeded your budget, ensure you subtract the amount you have exceeded with from the next month. The rationale for this is simple. If you earn Kshs. 50,000 and for some reason, that month you get an emergency and use up Kshs. 60,000, your employer will not add you the extra Kshs. 10,000. If you take it as an advance, it will be subtracted from your next salary. Finances 101: How To Create A Budget And Different Budgeting Methods You Can Use
Set a deadline: In some instances, you need to set a deadline on how long you will offer support. If for example, you are catering for the needs of a jobless family member, let it be known that you will do it for a certain time, so as to motivate them in their job search. You do not want a situation where someone becomes lazy because they know all their needs are met. It is up to your discretion, when the deadline comes, whether you will continue supporting or not. You could make a judgement call based on how hardworking they have been in their job search to either continue supporting but set a new deadline, reduce the amount or do away with the support altogether.
Decline When You Can’t Afford to: It’s essential to learn how to say no, especially when you can’t afford a specific expense. Ward off unnecessary costs in a polite manner and stand your ground. Running into debt in a bid to support your family is a bad idea.
Prioritise: It’s advisable to put your immediate family first when considering your expenses. Decide who needs your help the most and allocate some amount of money to them. For example, if you have a cousin who wants new expensive shoes and an aunt who needs medication for a chronic illness, then most likely, the aunt deserves the support more than the cousin.
Plan for the Unexpected: Invest in financial vehicles such as funeral covers, medical covers (even if it is NHIF) that can help you smooth out financial stress related with helping when there are family funerals or illnesses.
Have Clear Financial Goals: Set clear financial goals and keep them in view, so that you can know what you are working towards and avoid anything that could affect it. These goals will remind you of what you need to achieve so that unnecessary expenses will not creep in and stand in the way of you and your goals. Planning for the future; How to create a Financial Plan
Put Money Aside For Yourself: Give what is left after you’ve saved for retirement. Ensure that you will retain independence in your old age, otherwise, you will perpetuate the cycle of dependency. Money: 8 Personal Finance Tips That Will Transform Your Life
You may not be in a position to stop paying black tax, but you could ensure that the cycle stops with you so that your children do not have to pay it. Here is part 2. Dealing With ‘Black Tax’ Part 2: Building Generational Wealth To Break The Black Tax Cycle