Suze Orman Money Matters

Do you:

• Lease a car (not for business) simply so you can trade it in every three years for a new car?
• Have an option ARM or 1-yr ARM?
• Pass up participating in your company 401(k) even though it comes with a company matching contribution?
• Ever miss paying the minimum amount due on your credit card on time?
• Carry a credit-card balance because you can't pay off all your shopping, dining and entertainment costs each month?
• Have a credit score that's below 720?
• Have a $3,000 plasma TV, but you haven't funded a Roth IRA?

If you've done any of the above but answered no, then you aren't being honest about what you need to do to build a financially secure life. In many cases your motivation is to keep up with your friends and neighbors.

Don't Avoid the Truth

No one needs a new car every three years. Many car owners are tempted to trade in and trade up every three years so you can have a fancy new auto to turn heads at the stop light. But you're throwing away thousands of dollars on a depreciating asset for the absurd thrill of impressing strangers.

A risky option ARM or a one-year adjustable interest-only mortgage are mortgages designed for people who can't really afford to buy a home. If you can't buy a home by using a more conventional mortgage such as standard fixed rate or a Hybrid ARM tied to how long you intend to live in the house, then you should wait till you can. The smarter strategy is to shop for a less expensive home in the neighborhood you want to live in or expand your search to less expensive neighborhoods. Instead you have an incredibly risky mortgage that could put you in a deep financial hole.

Anyone who doesn't participate in a 401(k) plan that offers a company match, pleading that they can't afford it, isn't being honest to themselves. You can't afford not to participate. The matching contribution is the same as a bonus. And in many plans it's not hard to qualify for a $1,000 or $1,500 match each year.

Late bill payment hurts your credit score, and with a FICO score below 720, you can't qualify for the best loans and financial deals. That means a higher interest rate on your mortgage or car loan, or even higher car insurance premiums -- costing you thousands of dollars. There's no reason you can't get the payment -- especially the minimum amount due -- in on time.

And don't get me started on running up high credit-card balances for purchases such as dinners out, expensive clothes, and getaway weekends. Much of the $9,000 average credit-card balance in the U.S. is probably the result of unnecessary and indulgent purchases.

Roth Payoff

Financial security is all about your ability to be honest to yourself. Instead of saying you don't have any money to make a smart move like invest in a Roth IRA, you make a commitment to see where in you can nip and tuck your spending to come up with the money for investing.

Yes, it may mean curtailing your nights out or not buying a new outfit every month. But you're facing the facts: You know you need to save for a down payment, or for retirement, or so you'll have the safety of an emergency cash fund.

If you do invest just $250 a month in a Roth IRA for the next 10 years, you will have more than $46,000 saved up, assuming you earn an average annual return of 8 percent annually. Then even if you never invested another penny -- though you know I would encourage you to always keep saving -- that sum would grow to $315,000 in 25 years, assuming that same 8 percent average return. Clearly, honesty pays.

We all want to lead honest lives, but what so often throws us off course is the intense pressure to keep up with the people we socialize with. Financing a social life we can't afford, but think we deserve, merely avoids the hard facts about your money situation.

What you deserve is a life lived honestly. When your life is built on avoiding financial truths, you're bound to be depressed and anxious. I think you deserve better.

The Security of Self-Worth

The solution comes back to one simple truth: You need to dig deep and develop a strong sense of self-worth. Without a solid dose of self-worth you can't have lasting net worth (see "When Counting Blessings, Choose the Right Ones").

And honesty is at the core of self-worth. An honest person is respectful of what's truly important, looking at every financial decision with an eye to long-term security. As a result, you don't feel the pressure to "keep up." You know the only important person to impress is yourself -- with sound financial decisions. Commitment to an honest life will build a more financially secure future -- and that's the truth.