I haven't made my first knife yet, but I have made a few lathe tools using oak as a handle material. Oak is dirt cheap, needs no stabilization and makes a great handle for tools.
This process is much faster and less tedious on a lathe, but easily achievable by hand as well.
Once you get your handle to your final shape, you want work in some wood filler. I use the cheap minwax stuff that comes in a yellow plastic tub. It looks like peanut butter and is about the consistency of the whipped cream cheese you can get for bagels. While working in the wood filler be sure to rub it in firmly and in every which way you can, your goal here is to penetrate the pores of the wood. The wood will take on a dull yellowish tinge and look like crap, but don't worry this look wont be staying.
after your wood filler is worked in and dried up, start sanding your handle I generally start with 180 grit and go on up through the ranks until you can no longer see the layers of wood filler and the handle has a nice smooth solid feel to it. after sanding use the finish of your choice, for my tool handles I use minwax paste wax to finish them, but you can use any oil, laquer, poly, etc you want on it. If you take your time you will have a very cheap, very durable and decent looking handle. I've had my homemade lathe tools for years and not so much as a crack yet.
You can get oak super cheap, even cheaper if you have a woodworking shop that sells cutoffs, the last bit of oak I bought was from a scrap bin out front of Rockler, it was 4 or 5 ft long and 10" wide and cost me all of 3 or 4 dollars
The handle in this pic was made from some scrap oak I had finished with the process above, sanded it to maybe 320-600 grit tops using paste wax with the higher grit papers, all materials involved I would say it cost me about $1 and it feels great in the hand.