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Personal Finance
How to Navigate Black Tax as a Nigerian
Ademola Adepoju
November 4, 2021
3 mins

Grrrr….your phone is ringing. Even your heart is beating to the rhythm. Because Kenneth, one of your cousins, is calling to ask for money to buy yet another handout in school.

As his big bro, you cannot say “no” like that. You know how difficult university life can get because that used to be you once. It’s difficult but you have to do it. That means you’ll probably have to wait a little longer to get your new TV. Or maybe just get a smaller one.

Anyone who has had to deal with black tax knows this feeling, especially young people more recently. That feeling of responsibility. Inconvenient but sometimes unavoidable.

 

What is Black Tax?

In simple terms, black tax is that portion of the income that individuals who (mostly) belong to the working class send to their family members, usually monthly.

For many, it’s a duty to family and loved ones, especially in cases where you’re the more successful individual in your kin.

Black tax can take some toll on your personal finances and development when not managed properly. And while it isn’t that straightforward to deal with - a lot of emotions can be involved - you can still offer assistance to your family members without hurting your finances in the process.

Here are some ways we think you can manage black tax.

1. Break down your dependencies into levels

The truth of the matter is you can’t help everyone. It’s even more valid when you’re early in your career and earning real income for the first time.

One way to navigate black tax is to determine your main responsibility. Do you want to focus on helping your immediate family for now? This could mean setting a reasonable part of your income that’s sent home monthly. It will serve as your monthly budget for black tax.

As income increases, you could then start extending help to members of your extended family.

2. Prepare for emergencies

We can be consumed with helping others that we forget to plan for our own selves. What happens when something unexpected happens? Like a job loss. According to the World Economic Forum, 119 million people lost their jobs to COVID-19 in 2020.

As a way of preparing for unforseen circumstances, it’s always good to religiously save parts of your income. Something that can sustain you for at least six months.

It’s even better if you can lock the funds so that you’re not tempted to use it when bills (especially the ones you don’t necessarily have to incur) come knocking.

Head over here to lock your funds and earn 15.5% interest while at it.

3. Teach your family members about financial literacy

Sometimes, people come knocking for financial assistance not because they’re poor but because of bad financial habits. They probably don’t understand the importance of budgeting or saving for the rainy day.

In this case, you can make it your responsibility to educate your family members on better ways to handle money and build wealth.

Many of our older folks didn’t have access to digital financial tools that help you save and invest money.  So, why not spend some time to show them how to be more financially healthy and in the process take off some burden on your income.

You can also earn some money from referrals when you introduce family and friends to Carbon. Start here.

4. Relieve your spending by paying smarter

It’s getting harder to stick to budgeting these days. There are most likely things you need for yourself but can’t get due to your responsibilities at home.

But black tax shouldn’t deprive you of getting essentials that contribute to your career progression like a laptop or alternative power sources, for instance. To navigate this, you can take advantage of buy now pay later products which help you split payment on these items at no interest or extra cost to you.

This way, you don’t have to spend all the money at once. You can send money home and still save some in your emergency fund.

Learn more about Carbon Zero, our buy now pay later product.

Two broke people can’t help each other

One of the positives of society is that we can help each other when in need. It’s a beautiful thing. We only have to be sensible about how we go about it so it doesn’t become a disadvantage financially.

Set boundaries with your income and stick to your budget for everything, including black tax. Don’t dip into your emergency fund or investments. Remember, we can only help others when there’s enough in the reserves.

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