Finance Guides

Black tax: An investment or a burden?

How do you deal with black tax? How do you give as you wish vs giving in to society expectations?  These were questions asked during one of my Financial Coaching sessions. I have taken time to ask various people how they have dealt with this complex question and

How to make ‘Black tax’ rewarding  and ensure it doesn’t hold you back 


How do you deal with black tax? How do you give as you wish vs giving in to society expectations?  These were questions asked during one of my Financial Coaching sessions. I have taken time to ask various people how they have dealt with this complex question and share some of the tried and tested advice. Hope you find it useful.


The payouts that you make to extended family outside your planned expenses constitute what has come to be referred to as Black Tax. The term has its origins in South Africa where expert black entrepreneurs found themselves obliged to disburse pay outs to their extended family on a regular basis. Today the term is used casually in speech to refer to such expenses. It has been identified as a struggle for many, and constitutes uneasiness on personal finances in both the long and short run. 


Many African households do not have generational wealth, so the first ones from the house to “make it” cannot indulge in their income selfishly but must share a portion of it with the family to keep them living sustainably. Nor can they make individualistic financial decisions as these have a ripple effect on the family’s financial trajectory.


The excitement of getting your first paycheck can not be underestimated. At the same time, learning to manage your finances, getting a good start on your savings and making the right financial decisions can be difficult when you’re just starting out.


On top of that, many young people have a responsibility to start giving back to their parents and families who have ‘sacrificed’ much to give their children a decent education. It is important to note that failure to handle these expectations may harm one’s own financial wellbeing in the years to come.

For anyone starting out, there is a great deal of anxiety that accompanies the responsibility to support an extended family while at the same time building your career and trying to achieve your financial balance. 

Unfortunately, no one can ever force you to give from an empty cup. Remember that you need to live within your means. You determine your budget, so you can determine how much you are willing to succumb to the real and perceived pressure to give back. 

So how do we learn to manage our finances in a way that helps us support our families without jeopardizing our own financial goals?

  1. Be realistic about your money

You cannot take control of your money if you do not understand your financial situation – your income, expenses and commitments. There are many tools that can help you track your inflows and outflows, try out the Personal Financial Statement, a tool that helps you take control of your Financial situation.

  1. Ask for help

“We don’t always know how to create and maintain financial boundaries with our loved ones, and this is something a financial adviser/coach can help you to put in place.” Book a free discovery session with one of our experienced coaches.

  1. Financial conversations should not be a taboo with your loved ones

It’s important to align with your family/spouse/children your financial goals and a view of your expenses to help them understand what you can afford. Many times our families believe we can afford more than we can. This is why it is important to have open conversations with the people that we trust and for whom we are financially responsible.

  1. Empower yourself and your family

Demonstrate healthy financial behaviour, for example, by drawing up your budget and sticking to it. Leverage various available tools like Apps, spreadsheets,etc to embed this in your way of life.

  1. Enjoy your income

What would you do if you had all the money in the world? If you were not working, where would you rather be?

Find time to enjoy your hard earned money. Time is an illusion so do not wait till you are retired to enjoy your money. Build mini retirements along your working life. Finding a balance between your financial responsibilities and working toward your own financial goals can give you peace of mind when it comes to your money.

  1. Mindset change

You can see it as an investment. You contribute financially, knowing that in the future you will receive your return tenfold. For example, you may have a cousin who needs assistance with school fees. You could then pay the fees, and in return, he fetches your child from school after work whenever you are unable to.

Two, you may view Black Tax as a way of giving without expecting any quantified return. For example, you see a need at home for financial assistance, and you genuinely want to help out of love and care for your family, which is self-satisfying on its own.

  1. It’s okay to say NO

We should understand that NO is a complete sentence and warrants no explanation. People always have a ‘Plan B’ so you should not feel obliged to sort out everyone’s financial challenges. Give help, but on budget. Borrowing to sort out someone’s challenges takes you many steps further from your financial goals, and no one will be willing to bail you out.

  1. Pay Yourself First

The advantage of “paying yourself first” out of your paycheck is that you build up a nest egg to secure your future, and create a cushion for financial emergencies Without savings, you will be looking at your children as your retirement package which further accentuates the ‘Black tax’ syndrome. 

We are privileged that this generation has quite a number of investment options available, it’s important to gain relevant investment knowledge and seek financial advice.



But how can you best prepare for Black Tax? It pays dividends to have a conversation with your immediate family members and tell them that you will provide what you can, but they must not make you feel as if they are entitled to your money. Set financial goals to know how much you can actually give without financially depriving yourself.

Create a budget plan for the month, and determine where your money needs to go without anyone pressuring you. Instead, you pressurize yourself because you genuinely want to help your family. Black tax can be favorable if you approach it in a healthy and financially savvy way.

Sometimes you may not actually have to give money; time, advice and a listening ear may be all that a person needs to unlock opportunities. Take time to mentor, coach or give opportunities to your extended family, you will reap dividends.


Please share your thoughts on whether you have encountered this situation and how you navigated the challenges. Join our community and share your view, Financial Fitness Spa Forum URL:

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