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Other important power tools—A good jigsaw will help get you through many tasks, particularly cutting curves, that would otherwise require a bandsaw. Look for one with blade guides that keep blade deflection to a minimum. A handheld drill is also essential. A quality corded drill is much less expensive than a cordless one, and will never leave you without a charge. Also look for a quality random-orbit sander with a provision for dust collection.
One purchase that did work out in my favor this year was a bandsaw. I found an old, built in 1946, 14" Delta bandsaw w/ riser block in good condition for a steal at $150. I had a couple months of free spend saved up, and my wife threw in the rest of the money and considered it my birthday gift. Attached to the saw's base was an old Stanley 77 dowel maker the seller gave me with the saw since it was attached to the base when he got the saw. I was able to sell it on ebay for just shy of $300. I actually made money on that deal, and the money from the sale has allowed me to buy blades and upgrades for the bandsaw, as well as the parts and materials I need to build the router table I'm in the process of building. Was nice to get that - otherwise it would be months before I'd be able to purchase some of those things!
Just how small? Will you have an extra bedroom for your shop or will you be doing woodworking in your living room? Do you have to put the projects and tools away every time you want to entertain or will you leave everything set up all the time? A while back FWW had a video tour of a shop in Japan that was smaller than small. I'll try to find it and get back. Found it... shows what can be done in a small space but this shop was not on a small budget so no help there.
I, too, would pass on the Jawhorse, and agree with the suggestion of a solid bench. (Remember, it can double as a desk if space is limited.) A used solid-core door can be a starting point, but there are better options, such as laminating your own from scrounged 2x4s. Spending time at flea markets looking for old tools that can be reconditioned is a good suggestion, too.
Just like a hammer and tape measure, a drill is something a lot of people already keep on hand for small household projects. Danny and I started out on a SUPER cheap drill when we first got married and quickly learned that this was not something to cheap out on. If you plan to do much woodworking, invest in a quality drill. It doesn’t have to be the best of the best, but do at least get a mid-grade drill.
I wouldn’t give up on Craigslist or garage sales.. For around $1K or less, you can pretty easily find the four big ticket items (TS, BS, Jointer and Planer) and have the extra $2K to spend on accessories, material, DC, other goodies, etc. The key is patience and persistence, and if applied correctly, you can have a fantastic setup for very little compared to purchasing new. If you are setting up a business, you don’t usually have the time to scour for good deals, but for a personal shop, there is no pressing need other than that itch to get something done.