‘Black Tax’ presents a reality for many South Africans, and along with the economic realities of COVID-19 it may be adding pressure to the budgets of those who are stretched to support their own and extended families.
While Black Tax is a real obligation to help provide financial relief, it can become a vicious cycle if not managed properly.
Black Tax’s long-term goal should be to enable your family to become financially independent. However, supporting parents and other extended family members might unintentionally limit your own financial sustainability and restrict your opportunities for financial independence. The tough times in which we are living make it quite challenging to achieve a balance. On the one hand, there’s a need to help where we can and, on the other hand, we need to be cognisant of the need to plant the seeds of future advancements.
Highlighted here are six considerations to help you and your family balance your finances and financial obligations:
- Pick your battles
Have honest conversations with your family about need-to-haves vs. nice-to-haves to set clear expectations regarding the things for which you are willing and able to provide. This will allow you to justifiably refuse unexpected and unnecessary requests for financial support.
- Agree on deadlines and match the commitment
When finance is required for goals, be upfront about how long you can offer financial support and set deadlines for when you expect to see results, for example a qualification after paying for education. Factor in that life does happen and the key is that there should be evident commitment towards the goal to be reached.
- Expect the unexpected
When you are financially supporting your family, it is important to build an emergency fund to safeguard you and your own family against unexpected situations such as unemployment or other scenarios that may require additional funding.
- Give but empower for independence
Giving back is important, but the ultimate goal is to instil financial independence and resilience rather than to create long-term dependence. Help your family with their finances, direct them to get professional financial advice, and share any articles or lessons on budgeting, managing debt and saving to ensure financial sustainability.
- Play fair
For sustainability, and to avoid the situation of relatives relying on debt to make ends meet, it is important that family members who are being supported play fair. This can be done by not having unrealistic expectations, not committing to things that require financial support without getting an agreement upfront, and not living beyond their means at the expense of the person helping to support the family.
- Put yourself first
You cannot help others as well if your finances are not receiving proper attention. You risk trapping yourself in a hole, which will not benefit you or your family. Ensure you have access to professional financial advice to help you pay yourself first by saving for future emergencies and retirement. This will ensure that you retain financial independence, have solid plans to keep you going should unexpected things happen, and avoid perpetuating the cycle of dependency.
While there is a call for empathy and for giving to others, especially during tough times, it is important that we establish principles and habits to enable our own financial resilience and prosperity so that our own families and future generations may thrive.