I believe that self-honesty is one of the most important principles of personal development, and that people do not stress it enough. It is what keeps people from achieving their full potential of growth and achievement, and keeps them unnecessarily unhappy or stressed.
We all lie to ourselves to a certain degree because we want things to be a certain way, or because we are afraid of change. Since birth, we have been conditioned to believe that certain beliefs and ideas are correct, and that anything that contradicts them is either wrong or silly. Through society and life, we have all developed preconceived notions about religion, other people, ideas, and products that may not be entirely true. Letting go of these ideas can be extremely difficult.
When something comes up in our lives that forces us to make an important decision or change in the way we view things, we often resist it because of our natural tendency to keep things the way they are. This is called homeostasis. When this happens, we are very likely to deny what is really needed at the given moment rather than to be honest with ourselves.
For example, many people do not like to be thought of as weak or vulnerable. I know I used to be this way. I had, and still have problems with social anxiety. I used to deny this part of me rather than address it because I hated the thought of being not in control of my life. Because of this, I delayed getting help, which only made things worse.
The failure to be self-honest can hurt people in other ways, too. Many people are very dogmatic about their beliefs, and do not concede some of their ideas when they really should. People who are very passionate about their political parties, religion, or philosophy on life do not like to admit when they are wrong, but would rather stick to their ideas about the world when more than enough evidence is given to prove they are wrong. This indirectly hurts them and brings along unnecessary negative repercussions.
When we are not honest with ourselves, it hurts us emotionally and hinders our growth because we are not accepting things for what they really are. We are also not addressing things that need to be addressed, which will only create deeper wounds inside ourselves over time.
So how can we develop more self-honesty?
In general, it is helpful to consciously try to aware of what your mind is doing or how it might trick you. Try to catch yourself when you think this is happening. Personally, I have found meditation and various mindfulness practices to be highly beneficial in developing self-honesty, but I think that people need to find what works for them themselves. :)