What is the REAL rate of inflation 2.5% or 12.5%?
In my opinion, inflation rates are extremely understated, please see these two articles that drive the point home:
http://www.businessinsider.com/if-people-knew-the-...
https://www.zerohedge.com/news/2017-05-09/devonshi...
Essentially, in times when the dollar is depreciating rapidly, in our situation due to excessive years of "easy money" and quantitative easing by the Fed, low fixed-rate debt is the best tool to combat inflation. The way that I have rationalized it is that, if I can lock in an interest rate (say 4.375%) that is below the real rate of inflation (7.5% minimum), in this case several magnitudes, I can come out way ahead. The CPI has been manipulated to exclude the cost of day-to-day living, and intuitively we know this because we have less buying power year after year, consider the price of any staple you consume.
Current Prices vs. Historical Prices
Source: https://www.financialsamurai.com/are-you-a-real-mi...
We had the dot-com bubble in the late 90's, followed by the housing crisis (collapse) of 2008, and in my opinion the dollar is the next bubble, see Forbes article below:
https://www.forbes.com/sites/kenrapoza/2015/01/26/...
Additionally, if you do agree that there is a much higher inflation rate than the Fed reports, stashing cash and earning interest below 8% is a LOSING proposition.
So, my bulletproof investment formula is the following:
Maintain at least a 40% savings rate, invest your savings at >8% returns to outpace the real rate of inflation, save until you can afford to put a large deposit down, flip that into a low fixed-interest loan, to generate at least a cash-flow neutral investment return on an appreciating asset.