Last weekend, Socialist leader Francois Hollande defeated Nicholas Sarkozy by a 3.2% margin and 51.62% of the vote..  This ends Sarkozy’s 5 year term as president and 17 years of right wing government in France.  Hollande campaigned on the need for more growth-generating economic policies and less reliance on austerity measures like deficit-cutting and lower spending.

In Greece, the election resulted in a split parliament with no party likely to be able to form a government. The two parties that governed as a coalition for the past six months and pushed through strict austerity measures in order to receive bailouts received only 32% of the vote.  Instead, voters supported extreme parties of the right and left.

It is looking increasingly likely that voters will have to go back to the polls next month after multiple parties have been unable to form a coalition.
This news has investors particularly worried.  A period of uncertainty looms for the bailed-out country, which is now in its fifth year of recession and has over half its youth unemployed due to big spending cuts and tax increases in return for crucial international bailout funds.

In both countries, voters rejected austerity as a solution the economic issues currently gripping the continent, instead placing support to advocates of greater stimulus (Hollande) and rejecting the conditions of already-received bailouts (in Greece).

The French election also throws into question the key partnership between France & Germany, the powerhouses of the European union and Euro currency.   Hollande vows to renegotiate the recent “Fiscal Compact” with Germany.  That pact had called for government spending cuts as a cure for soaring debt levels.

Market Recap (as of May 11, 2012)

The TSX closed at 11695, down -174 points or -1.47% over the past week. YTD the TSX is down -2.17%.

The DOW closed at 12820.6, down -217.4 points or -1.67% over the past week.YTD the DOW is up 4.93%.

The S&P closed at 1353, down -16 points or -1.17% over the past week.YTD the S&P is up 7.55%.

The Nasdaq closed at 2934, down -22 points or -0.74% over the past week.YTD the Nasdaq is up 12.63%.

Gold closed at 1586, down -50.00 points or -3.06% over the past week.YTD gold is up 1.34%.

Oil closed at 95.85, down -2.68 points or -2.72% over the past week.YTD oil is down -3.08%.

The USD/CAD closed at 0.9993, down -0.0055 points or -0.55% over the past week.YTD the CAD/USD is up 1.99%.

The answer is it depends. Most employer will only cover a small amount such as $25k or 1 x your annual salary. If you have a family, or if your lifestyle is based on two income,… you will likely need a lot more. The good news is that term insurance is very inexpensive and easy to get from a licensed advisor and will be covering you even if you change job. Start by at least covering the mortgage with personal life insurance not through your bank because it won’t decrease with your mortgage and will likely be cheaper.

Use any cash you receive wisely is the golden rule.

If you are lucky enough to get a tax refund from the government, before you spend any money you receive, remember that it is no gift or free money.  It is your hard earned money come back to you.  So use it wisely. Here are a few strategies to consider.

Pay off debt

If you are carrying large credit card bills at doubledigit interest rates, wipe the slate clean. If you have no credit card debt, pay down your mortgage. A $1,000 prepayment on a $100,000 mortgage amortized over 25 years at 5% will save you over $2,300 in interest.

Make a lump sum contribution to your Retirement Savings Plan

The sooner it starts compounding the better. A $1,000 RRSP contribution earning an annual average return of 5.7% over 25 years quadruples to $4,000. And your RRSP contribution could result in a tax refund next year.

Pay back your RRSP Loan

If you took out a loan to make an RRSP contribution, use your refund to pay that loan back. You’ll save on interest charges and free up money that would otherwise go to your monthly loan payment.

Contribute to a Registered Education Savings Plan.

The federal government provides a 20% grant on up to $2,500 contributed each year ($500). That’s free money. Contribute to a Tax Free Savings Account.

Invest the refund in a TFSA – Tax Free Savings Account

You can invest $5,000 per year into a TFSA . You don’t get a tax deduction but any income earned in the account grows tax free.