By Althea Chang
Being in denial about money matters can make a bad situation worse.

Most Americans feel today's economy is riskier than the one their parents faced a generation ago. And the recession seems to be proving them correct. At the same time, the majority of those on Main Street think they’re doing pretty OK managing their money.

A whopping 93% of those surveyed say they’re doing a fair job or better at managing their economic and financial opportunities and risks, according to the Allstate-National Journal Heartland Monitor (Stock Quote: ALL), a series of surveys on how folks are dealing with personal finance issues.

Only 5% of the 1,200 polled said they’re doing a poor job.

The disparities with reality (um, that recession we noted above) are notable. 

Sure, some consumers are making changes: 34% said they’ve cut back on wasteful spending and 22% have taken steps to live within their budgets. But it appears denial runs deep. Only 5% of respondents said credit card debt concerned them most—but the average credit card debt per household with a card was $10,679 at the end of 2008, according to a recent Nilson Report. 

Are We Being Honest About Money Matters?
Same country, same consumers, different picture: In another survey, more than one in four respondents admitted they didn’t pay all of their bills on time. (This was part of the 2009 Consumer Financial Literacy Survey conducted for the National Foundation for Credit Counseling.)

And about 13 million adults have been contacted by debt collectors, are seriously considering filing for bankruptcy, or have already done so within the past three years, according to the survey. One third of adults say they have no savings whatsoever, according to the survey.

About 41% of adults gave themselves a grade of C, D, or F on their knowledge of personal finance, according to the National Foundation for Credit Counseling survey.

Are You in Denial?
So what's the deal? Everyone's deal is different, actually, but experts recommend that you ask yourself some tough money questions and seek honest answers.

“It’s common for people to be in denial of a difficult situation that they feel is out of their control,” says Dr. Nancy Molitor, a clinical psychologist in Wilmette, Ill. Molitor compares this tendency to people who underreport how much alcohol they drink. “Part of us wants us to be better than we are.”

To determine whether you’re in denial of a difficult financial situation, Molitor says you’ll have to ask yourself a few questions:

• When you have to make money decisions, do you feel a surge of adrenaline, physical aches or pains?
• Do you have a sense of dread when it comes to managing money?  Do you have a visceral or intense reaction or shut down and tell yourself you’ll deal with bills tomorrow or next week?
• Do you have a past history of financial trouble?  Do you chronically make late payments or have you made multiple loan modifications?
• Did you grow up in a family where money was used as a weapon or a means to buy love?

If you answer "yes" to more than one of these questions, you might want to get help. Ask a financial planner, a family member or spouse who reacts less emotionally to money, or even a therapist. And learn as much as you can about money and personal finance. When it's less mysterious, it's less frightening and you'll be more likely to take control. Hey, that's what MainStreet is here for!

Still, even though it is stressful, many of those surveyed in the Heartland survey said that today’s economy presents them with more opportunities to improve their standard of living than their parents had when they were younger.  About 42% said they have more opportunities to improve their standard of living.

Improve yours by ditching money denial.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.