Best handle material to start out with for starting out.

Have you considered horse stall rubber mat?
A 12 X 12 X 5/8" piece is around $7.00

http://usaknifemaker.com/horse-stall-mat-recycled-rubber-12-x12-x5-8.html

it can also be found at tractor supply places. but it is very hard to work esp with out a 2X72 and sharp belts.
another option is wood like many have said. I like Wenge It is a wood that is easy to work with files and paper, I don't remember if it is one of the poisons woods but I wear a perpetrator the whole handle processes. I also have some Ipe and Paduk but havent worked with them much.
other wood you might try are Ash, and Osage orange.
you could do a para cord wrap (soaked in resin optional) similar to Ito wrap on Japanese swords, or you could do a hemp wrap like Rick marchaund.
 
wow, that is cheap per piece. How hard is it to work?

Sharp belts are a must. But it makes for a comfy handle and you can sand it to a very low "finished" grit. There are other suggestions here that will probably make a nicer looking handle, but for the cost, it's hard to beat.
 
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.

oak_handle.png
 
My local wood working store (wood craft) sells precut lumber 1/8 to 3/4 inch thick, these go on sale all the time. Usually enough wood for 4-5 sets of scales for about $20. I have purchased the more exotic wood, typically black palm, and sent it out for stabilization, but they have alot of pretty good looking wood and the size is easy to work with. If you have a woodcraft nearby they have just got their annual shipment of sized lumber. It not realy pretty stuff so I am not sure what the wood workers us it for but there is plenty of hardwood good for knife handles.
 
Even cheaper than these sources of wood is find a custom cabinet shop and ask to sort through thier scrap bits. Maple, curly maple(harder to find), oak, hickory(pecan), etc type woods for 0 dollars. Just spend a little time finding pieces you like. I left the shop with about 30 pounds worth of wood from thier dumpster and I am well set up for several years. There was hundreds of pounds more in there.
 
Yeah I live in a rural area of Missouri. I'm about 1 hour from Omaha and 2 hours from KC. There isn't much around in the way of cabinet shops or anything. The local carpenter guy said they usually just go and buy cabinets from homedepot when they install them.
 
Well I live in rural texas, roughly 1.5 hours nne of dallas. You dont have to go to a large city to find a cabinet shop. Nearest town of population over 3k is half an hour away from me and even then its under 20k people. Just try some google searches for custom woodworking, custom cabinet maker, custom wood furniture that sort of thing.
 
Wood is everywhere.

Old broken furniture sitting by the roadside or at the county dump. ( mahogany, maple, walnut, oak, etc.)
In all sorts of decorative items, and occasionally as boards at yard sales and flea markets.
In the overhead of neighbors garages.
Sitting in old wood piles. ( Some of the best spalted persimmon and spalted maple I ever had came from an old woodpile)
Old barns, buildings, wagons, etc. ( usually very durable woods used here)
Old flooring. ( some really great wood can be found right under your feet)
The rummage sale area or storage room of a local Church. (Sometimes they have old broken tables/chairs/pews sitting in the back room gathering dust.)
At the local thrift stores. (I have seen shelving and bookcases made in great wood for $10)

Don't let a worn exterior fool you. Often great character and top notch wood is 1/8" under that gray cracked looking exterior or old finish.
 
Also keep an eye on the Knife Makers Supplies and Tools For Sale Board
Some really good deals come up from time to time. I just bought a big box of wood from maker J. Doyle for a great price.
Also DreamBurls, who advertises there, is a great source for high quality wood at a great price. Keep an eye out for his sales. That's a great place to start looking for nicer wood after you develop your skills.
 
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