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While commercially available notebooks have a nice polished feel to them, they are extremely expensive. If you use a large number of them, there is a considerable savings from making your own. If you professionally print the paper stock for them, they have the added benefit of customizable page layouts, for example, storyboards, grids, plain paper or normal lined paper.

Step 1: Materials and Tools

Materials:
Corrugated Cardboard (Don't get fancy, cut it out of a box)
18 sheets of 8.5 x 11" paper
Thread
Wood glue (PVA) or any glue with some flexibility (White glue would work as well)
Cheesecloth (although any kind of coarse woven fabric should work.

Tools:

Text editing program such as Pages (Mac) or Word. (Textedit or Wordpad would also work)
Black and white printer (or a local local copy shop)
Needle (Blunt is good, for the sake of your fingers)
Guillotine (optional, but makes the cutting so much more precise, not to mention a few hundred times faster)

and either

2 or more Clamps and Small (6 inch by 8 inch or thereabouts) pieces of plywood
or a vice

Step 2: Designing the Paper

Obviously, the first step is to design the paper. Some websites have lined paper patterns that can be downloaded and printed. Since we are making our own notebook, we might as well design the paper as well.

If you are making a blank notebook, skip to step 4.

Open a new file in your text editing program, and set the margins to 0 and 8.5 so that the printed document will fill the page. The top and bottom margins can be set near the top and bottom as well, but I like having extra space at the top of the notebook.

Next, fill the paper with underscores if you are making lined paper, or the pattern you want to appear on your pages. I'm sure there is a fancy way of doing this, but I didn't find it.
The notebook will be around 4 x 5.5 inches, so remember that each page in your document must contain 4 notebook pages. The fold line of the finished sheets will be on the centre of the pages, so leave room for trimming on both sides.

The attached lined pdf will work, but it must be printed double sided.

Step 3: Printing the Paper

If you are making multiple notebooks, it might be cheaper to get these pages printed at a local print shop. If you can not print double sided, this will be much easier, although feeding the sheets through the printer twice is an option.

Before you print all 18 pages, it is a good idea to print a few tests. Set your printer to the lowest ink volume and quality, and print a page to test the spacing of the elements. If you are happy with the design, print 18 copies of it double sided (Keep in mind that you will have to set the printer to 36, since each sheet of paper has 2 sides. If you have a photocopier, it may be cheaper to make one, and photocopy another 17.

Step 4: Cutting

First, cut the sheets in half horizontally (making pieces of paper 8.5 x 5.5 inches) , then cut 3/4 of an inch off each side, making the pages 7 x 5.5 inches.

You can do this by hand, but it is much easier to use a guillotine. Making sure to remove any members of the French aristocracy, set the guide on the guillotine to 5.5 inches, and cut all the paper to this dimension as shown in the picture. Next, set the guide to 3/4 of an inch, and cut that amount off each end of the sheets.

Step 5: Folding

This step is the most mind-numbing, but it is much easier with some simple set up. Clamp a piece of wood to your work table or desk.

Push the end of a piece of paper against it, then fold the other half over to meet it. make the crease as sharp as possible, with a fingernail, or a folding tool. Repeat this for all the pages of the book.

Step 6: Preparing Signatures

Divide the freshly folded paper into 6 piles of 6 pieces each. put the pages together, nesting them inside each other as illustrated below. fold the signatures closed,and align the pages by tapping the edges on a table.
Stack the signatures and align the edges. Place them between the two pieces of plywood and clamp tightly (or use a vice) , with the spine edge protruding 1/4 inch above the edge of the plywood.

Step 7: Preparing for Stitching

Before stitching the notebook, you will need to make pilot holes for the needle. Make 4 cuts in the stack of signatures, 0.5 and 1.75 inches from each edge as indicated by black lines in the picture. Only cut deep enough to puncture all 6 pages in each signature. This will probably be 1/16 of an inch or less. Don't cut any farther than you have to, it will make the stitching harder.

Step 8: Stitching

Unclamp the signatures, and thread a needle. Try it with the illustration below first. The arrows indicate loops around the previous row.
Tie a large knot at the long end of the thread, that will not slip through the hole through the first signature.
Pass the needle through (left to right) the first hole, then out the second, in the third, and out the fourth. Do the same from right to left. Before beginning the next row, loop it around the closest part of the previous row, and pull tight. Repeat this until the last stitch, as indicated below. On that stitch, loop the end of the thread around the end of the previous row multiple times, and tie it tightly to avoid the signatures coming apart.

Step 9: Reinforcing the Book

Put the stitched pile of signatures in the vice/clamps again, with about 1/2 inch protruding. Spread glue (pva wood glue or white glue both work well) on the pages, leaving some space on each end so that the glue does not get between the pages. Lay a small piece of cheesecloth over the glue, and spread a bit more on top, to ensure that it is well attached. Leave this to dry for a few hours.

Step 10: Making the Cover

Lay the sewn signatures out on the piece of cardboard you want to use for the cover. Figure out the measurement based on the amount of 'overhang' you want on the cover. Make sure the cardboard is oriented with the corrugations travelling up-down, not left-right. this will come in handy later.
The cover piece should wrap around the spine, and have a bit of overhang to protect the page edges. Use an X-acto knife to cut the cardboard to the right shape. You might want to round the corners.

Step 11: Attaching the Cover

Find the middle of the cover, and mark it. Centre the stitched signatures on it, and glue them down. Once the glue has dried, crease and fold the cover together.

Step 12: Finishing

The notebook also needs a strap to hold it closed. Run an elastic or a piece of guitar string through one of the corrugations, and glue it in place. A low guitar string works well, because it has a loop at one end that can be used as a fastener. If you are using elastic, knot the two ends together, and then slide the knot into the corrugation to hide it.

Step 13: Variations

If you are varying the page number, the stitching pattern is easily adaptable for more signatures. Try to keep the signatures below 8 sheets each, to keep the page ends aligned. Try cutting out designs with plain printer paper, and gluing them on the cover.

Go crazy!
It's an awesome idea! I made it today, but mine is slightly different. The format is DIN A5, so I could use an old booklet too.
<p>Just made it a few hours ago. I was a bit sceptic about my skills but looks like it came out great! Thanks!</p>
&nbsp;By guillotine you mean those things with a giant shearing blade and a wooden board with&nbsp;measurements imprinted on it? The giant shearing blade looks like a miniature machete if detached right?&nbsp;
This looks fun. I've been looking to reuse a LOT of kraft paper and PERFECT cardboard from work that I toss everyday. And I love notebooks/sketchbooks, etc. Will definitely be giving this a go. Cheers.

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