To those who have never made a budget and have never kept accounts the problem often seems at first thought so difficult a one that many decide that they have no basis for budget making and must therefore keep accounts for a time, before attempting a plan. This is a mistake. To be sure, accounts are kept not only to check up adherence to the plan, but also to make possible a better plan later. But the plan is the main thing, and there one should begin. It is worth noting that often nowadays the term "household budget" is used to mean accounts as well as plan. This is inaccurate, and as is usual with inaccuracy, is a cause of confusion.

It is highly advisable to make first a list of the family assets and liabilities. This is not imperative, and if the making of it is to delay the budget, it may be postponed for a little. However, the sum of money on hand (in cash or in banks) and any sum due the family should be noted, so that when the Assets list is made up it may be "as of" January 1st, or whatever date is chosen for beginning the budget period.

The Assets list needs first a sheet of paper, on which it can he made roughly: when complete it calls for a card of its own, to be filed with the other cards as described later. As the years go by, the Assets cards should become increasingly pleasant reading. Begin with all money available at the moment, whether in the form of cash in the purse or bank deposit. Then comes cash due, if money loans have been made. For a strict accounting one would reckon up milk tickets, car tickets, commutation tickets, postage on hand, but this is not necessary for the family purpose, since the amount these would show from year to year would not vary much. If the family has just bought a mileage book, and the Transportation-other-than-Carfare account is overspent, part or all of the cost of the book may be reckoned in Assets and charged up to the new account. But such a necessity does not often arise, and care should be taken that the charging is not done to make the accounts seem other than they are.

Then, in any order liked, the list of investments. When there are stocks or bonds, they may be listed either at the cost value or the market value. The business firm would of course choose the latter, but there is an advantage to the family in preferring the former, since it is not only simpler, but quite as apt to represent the real value. For example, the family has $450 in Liberty Bonds, bearing interest at 4 1/4 per cent. These bonds were bought at par - $100 or $50 - from the United States Government. They are guaranteed by that Government and on maturity they will be paid in full. Yet if sold to-day in the market, these bonds would bring perhaps only $400. If they were bought as a speculation, then the value is only $400, but as an investment they are worth $450. And the family that has invested liberally in these bonds and can hold them until they are paid might be discouraged by a shrinkage in their Assets list that is theoretical rather than real. Other bonds change in value, going up and down, and yet may still be steadily good investments. The family has actually saved the amount invested, not the amount the securities would bring if sold, and it is better psychology to represent the savings in real figures. If they can say: "You know we really have more, because those stocks are worth more than we paid for them," that is rather a pleasant state of things. It may not be true the next time the Assets list is made. If, on the other hand, they must say: "Those stocks have gone down; they really are not worth now what we paid for them," there is nevertheless the cheering thought that before the time comes for their redemption or sale they may have risen in value again. When there is great depreciation that is apparently permanent, the change from cost to market value must be made, or the Assets list is deceptive - and the family may have to be more careful as to the securities selected.

Life insurance savings are represented by the amount paid in premiums. Strictly their cost includes interest on the money paid in each year, but as there is no such actual payment made, it is better not to show this in the figures.

The value of real estate may be set down as what was paid for it, or where it has definitely risen in value, as the actual market value. This is a place where the family may legitimately reckon in dollars and cents the value of their judgment and foresight.

The total value of the Inventory may be added - indeed, should be, not only so that the family may realize how much money it has invested without bringing in interest, but also so that the value of one year may show the change from the last year. If the family has chosen to cut down the cost of the Inventory, as it may easily do by not adding enough to the household equipment to make up for the depreciation loss, this should be evident in the Assets. These may not increase as much as the family had hoped, but if the value of investments bearing interest has increased and that of the non-interest bearing items of the Inventory has decreased, then the family is in a better situation financially. But here, as always, all figures must show real values, so far as figures can be made to do so.

Liabilities can easily be expressed in figures. Money debts, large and small, are definite. Where accounts are due to tradesmen, these should not be included unless when paid the amount is to be charged to the old account. Ordinarily bills for December purchases charge to the January account, and if this is done year after year the accounts show 12 months each year. The business house must wait until all bills incurred in December (or any other last month of the fiscal year) are in before they can close the books for the year, but there seems to be no advantage to the family in following such a procedure.

III When And How To Make It 2