How to break the Black tax burden

Rhina Namsia

hina Namsia, Financial Consultant, Acemt Consulting on October 30, 2023. 

Photo credit: Bella Osako | Nation Media Group

What you need to know:

  • People burdened by black tax often face significant financial constraints. 
  • Tacking the challenges brought about by black tax requires a friendly approach. 

Rhina Namsia, a financial consultant and the founder of The Acemt Consulting in Nairobi, says that black tax, a term that originated in South Africa which refers to money that Black professionals and others with higher income, give to their parents, siblings, or other family members, often out of obligation or a deeply ingrained sense of family responsibility, knowns no age.

Almost every adult is subjected to it. People burdened by black tax often face significant financial constraints. 

Ms Namsia explains that a large portion of their earnings is typically allocated to covering the expenses of family members, leaving them with limited resources for personal financial planning. 

“This can hinder one’s ability to save for retirement or make future investments. On the flip side, the recipients never learn how to budget or properly manage money. I have had to deal with instances where individuals were asked to send money for specific needs like paying school fees or buying food for their families, only to discover later that these funds were not used for the intended purposes.

“Wealth building is a journey, not a destination. But then, if you have an income which is always going out, your wealth creation journey will be stalled,” she says. 

Ms Namsia notes that black tax payers often have to compromise their living standards and that of their children, which in turn affects their mental health. 

“People have become depressed because of pressure from family members who do not appreciate the little you are doing or how much you have sacrificed. You know you are financially-stressed if you cannot meet your very basic needs, have accumulated a lot of debt and keep borrowing to pay the debt,” she says. 

Ms Namsia elaborates that black tax payers can alleviate the financial strain through financial planning. 

“You have to know the four pillars, which are your income, expenses, savings and investments. Analyse your income streams, and define your goals both in short and long terms. This will determine how you dispense your needs, wants and black tax. If you budget and identify where you are spending most, ask yourself if it is worth it.

“Create an emergency fund for the days you will be asked to send some money impromptu. You do not have to tell them there is some cash spared for them. Build boundaries and make it clear that you will only fund important activities. Do not shy from setting boundaries just because they could sideline or talk about you in family meetings,” she adds.

Tacking the challenges brought about by black tax requires a friendly approach. 

“It is all about setting realistic boundaries around what you can contribute and having heart-to-heart conversations with your family about these limits. Plus, it’s really about helping them to fish for themselves, which means guiding them in learning how to manage their finances, save effectively, and make smart investments.