Quick cut to the finish - once I put a new handle on the hammer and removed some of the rust off the head, I found myself much more inclined to use it - apparently we like to work with attractive tools. And even if a thing is easy to do, it's more likely to get done if we have a precedent. So, all you beat up hammer users out there - renovate!
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Signing UpStep 1Tools needed
1) A new handle and wedges - available as a kit at your hardware store. If in doubt, bring the hammer with you to the store to make sure you buy the right size replacement handle. A friend has pointed out that a replacement handle may cost almost as much as a new hammer. Perhaps you might want to whittle your own handle.
2) A hacksaw for sawing off the old handle
3) A hammer and punch to drive out the old handle.
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Also it pays to study hammer handle grain to gain an understanding of which way around a handle is supposed to go on a hammer. Because hammer handles are a lot like baseball bats in that there is a hit and a no hit side. Sure it works if you put it in the wrong way, just it'll be more durable if you put it in the right way around.
This guy has a few tips that add to this topic:
http://www.minnesotafarriers.com/Hammer.htm
I've got a little cup in my toolbox where I keep my old wedges. The handles I buy come with 1 wood and 1 steel wedge, but I sometimes find I need two or more of the steel ones. Usually you can get at least one extra from the old handle.
I've redone a sledge before and sometimes you need three or more.
My grandfather left me an axe that has been in the family since the 1840's.
(We've had to replace the handled every ten or fifteen years, or so, and we've had to replace the head twice, but it's the same axe...)