Austen opens her novel by introducing Sir Walter Elliot, the owner of Kellynch Hall, and a man for whom "vanity was the beginning and end of [his] character." His favorite book, the reader is told, is the Baronetage, a book which holds record of the most important families in England, and which, most importantly records Sir Walter's own personal history. In this passage, we learn that Sir Walter's wife, Elizabeth, has passed away fourteen years ago, and that he has three daughters: Elizabeth, Anne, and Mary. Of the girls, only Mary, the youngest, is married (to a Mr. Charles Musgrove). Having only three daughters and no sons, the Elliot family fortune will pass to William Elliot, the girls' cousin, upon the death of Sir Walter. Sir Walter has decided, "for his daughters' sake," not to remarry.
Sir Walter's deceased wife, the former Lady Elliot, had been an excellent woman, and had complemented her husband's flaws with her sensibility and good judgment. But in the years since her passing, Sir Walter has fallen in love with himself. Lady Russell, an old friend of Lady Elliot has helped Sir Walter raise his daughters and has become a trusted family advisor.
In this opening chapter, we are also introduced to the three Elliot daughters: Elizabeth, who is beautiful, yet vain like her father; Anne, who has a sweetness of character, but is often overlooked by her family; and Mary, who thinks herself very important since her marriage. Of the three, Elizabeth is the favorite of Sir Walter, and Anne is the favorite of Lady Russell.
The history of Mr. William Elliot is also recounted in this chapter. The family had hoped their heir would marry Elizabeth, yet he had slighted and disappointed them, opting for independence by marrying another woman of fortune and lower birth. Since this slight seven years ago, he has not been in the good graces of the Elliot family.
Finally, we learn that the Elliot family is distressed for money. Sir Walter has spent lavishly on a lifestyle well beyond his means. Mr. Shepard and Lady Russell, two trusted family advisors, help the Elliots save money and get their finances back in order.
Mr. Shepard and Lady Russell draw up a plan for ways that Sir Elliot can save money. They decide that he must "retrench" by seriously cutting back on his expenditures if he is to get out of the large debt he has accrued. Lady Russell, argues that such cuts will in no way lessen Sir Walter's standing in the eyes of sensible people since "Kellynch Hall has a respectability in itself, which cannot be affected by these reductions." Anne agrees and thinks their spending should be cut even more, since there is much they do not need.
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