Q.   Dave Ramsey, author of "Financial Peace," suggests that people should never purchase something on a credit card that they can't pay for when the statement arrives. Suzi Orman has similar ideas.

It seems to me that this would be a good thing for individuals, but it would be a disaster for the American economy. The economy depends on revolving debt for its growth. If everyone followed this advice, there would be massive unemployment in our nation with a lot of people not able to meet their expenses at all. What do you think?

---R.J., by email from Dallas, TX

  

A. I believe there is an inverse relationship between credit cards and IQ. A high credit card count is a good indication that the holder is a dim bulb. Mail box credit card offers and the credit card companies that make them should be seen in much the same way as an offer from the neighborhood heroin dealer.

But that's just how I feel.

While our consumer economy runs on credit, I believe it would be bigger and stronger--- not smaller and weaker--- if everyone made an effort to use credit prudently. That means eliminating the revolving debt that can cause you to pay 21 percent interest on a dinner out. It means pay-as-you-go financing for things that are consumed immediately. It means opportunistic use of credit for large purchases that are likely to provide years of service. It means eliminating the enormous drain of purchasing power that many consumers suffer because of the interest they pay on credit cards.

Remember, the estimated $50 billion a year that is spent on consumer finance charges could just as easily be spent on actual products.

  

Q. We are interested in your Margarita Portfolio. Right now we are invested through a fee-based adviser in Dallas. We started with about $133,000. The adviser put $20,000 into Wells Realty which has performed pretty well. The balance was put in an array of mutual funds. We have $16,000 in Rydex URSA and $11,000 in Prudent Bear Funds. Furthermore, we have about $5,000 to $6,000 in each of these funds: Fidelity Balanced, American Funds Capital Income F shares, Delaware Dividend Income A shares, Diamond Hill Focus L/S A shares, Evergreen Asset Allocation A shares, Federated Market Opportunity A shares, Leuthold Core Investment, Pimco All Assets D shares, T. Rowe Price International Bond Advisor shares, Rydex Long Dynamic Dow 30 fund, Rydex Inverse Dynamic Dow 30 fund, and Rydex Nova Fund.

We are very disappointed. We are down to $107,300 from $113,000. The fee is always roughly $400 a quarterly. I'm afraid we are lining his pockets. Do you have advice for us? We are not very savvy about investing.

---B.S., by email from Dallas, TX

  

A.   Yes, your so-called advisor is lining his pockets at your expense. Also, his portfolio doesn't make much sense since many of his fund choices are in the same category. Most are "moderate allocation" or balanced funds that invest in both stocks and bonds.

In most, but not all, of his choices you have paid a substantial up front commission. In addition, many of the funds pay a trailing fee. Then, on top of that, you are paying about 1.2 percent a year for ongoing advice directly to the advisor.

And that's just the money your advisor is collecting. The annual expense ratios of the funds--- are also quite high, with most over 1.5 percent a year. Add it all up and the fee burden on your investments approaches 3 percent a year.

That's good for your advisor and for the funds he is using. But it isn't good for you. Then again, he probably thinks that two out of three isn't bad, as long as he is one of the two.

Before you move your money--- and I think you should do it ASAP--- ask your advisor for an accounting of his commissions, his billed fees, and what he collects in trailing fees. I'll bet you won't get an answer.

Move your money to a major fund company and invest in a small number of funds. My Margarita Portfolio is one way to do it--- it would get you real diversification and would save you about 2.5 percent a year in fees.