An "Ace in the Hole," a small home business, is a great way to make money, save on taxes, and protect yourself ... in case the you know what hits the you know where.

Ready for action? No need to spend thousands on computers, furniture, and office supplies. Here's how to set up a cheap shop:

1. Start with what you've already got. In 1984, when Nancy and I started teaching people how to save money on their debts, we worked off the proverbial dining room table. Our office equipment consisted of a portable typewriter, circa 1970, our trusty rotary phone, a few sheets of carbon paper, and two old file cabinets topped by an inexpensive hollow door.

Bricks or cinder blocks, coupled with planks of wood, make great book shelves (and that college dorm look is so nostalgic). Last year, some of our boards and bricks finally gave way to two large, homemade bookcases.

2. Do the second hand ruse. Stop at garage sales, flea markets, auctions, and thrift shops, for particularly great buys on used furniture, and other large items. (The bigger they are, the harder they are to sell.)

A big plastic shirt display case, with 9 cubicles, cost us $1 at a garage sale 8 years ago. Even though we had no idea how we'd use it, the price was sure right. So we tied it to the roof of the car. Today, it holds newsletter back issues.

3. Search out born again electronics, like phones, fax machines, and copiers. Ideally, you want ones that used to live in large corporate offices, and still work, or have been refurbished. They'll be sturdier, have more features, and serve you better ... at the same or lower cost ... than a brand new machine that's marketed for the home office.

If you're lucky, there's a "materials exchange" nearby -- a clearinghouse for these essentially discarded goodies, as well as for used office furniture. When we needed a "new" used phone system, we called Jill Gruber, of the Hudson Valley Materials Exchange (845-795-5507).

Jill didn't have one, but she sent us to another warehouse in Albany, which had a great array of salvaged office equipment. We bought an ITT phone system that way more than fit the bill ... for 50 bucks ... a far cry from the $1,500 or so we had been quoted for other less sophisticated, albeit used systems.

4. Play tossed ... and found. For years, I've been a proud "dumpster diver," street scavenger, and recycling bin raider, regularly finding a treasure trove of discarded ... but eminently usable items. I've recently gleaned a file cabinet, a Samsonite attaché case, a Hoover vacuum cleaner, 2 wheelbarrows, and a matched set of 4 chairs -- plus most of the 50 or so magazines I look at, every month.

5. Start with a "chron" file. Instead of an elaborate data base or filing system, we keep copies of every letter and fax that goes out of here, in chronological order, in one central location. In most cases, we don't bother with any other files. We'd forget what we called them, anyway.

6. Perform silicon surgery. When you finally catch up to your computer's speed, upgrade your machine, instead of replacing it. Think of your computer system as if it were a stereo, with components that can be easily changed, and replaced with inexpensive generic parts.

7. Gratefully accept donations. While we will always mourn the loss of our good friend, and great supporter, Roger Darby, we've remembered him every time we use the file cabinets, printer, and financial calculator we inherited when he died in 1987. Then there's the fax machine, portable phone, and VCR, all from my brother, Alan ... as well as the bookcase loaned by our #1 researcher, Marcy Ross.

8. Barter a bit. Maybe your neighbor, the writer, would help with a flyer for your childcare business ... in exchange for some free babysitting. Need business stationery? Swap your service! Find a computer-savvy friend with a desktop publishing program, who can design you some.

9. Be picky. Comparison shop for everything, including office supplies. Here in the boonies, we compare catalog prices -- from Quill (800-789-1331), Viking (800-421-1222), Reliable (800-735-4000), and Office Max (800-788-8080). If you call for their catalogs, avoid some of the deluge ... ask that your name not be sold, rented, or traded.

10. Befriend your major suppliers. Most of our printing is done by Johnny's Ideal Printing, in nearby Hudson, NY, where our jobs are usually rushed through, to help make up for how far behind schedule we always are. We let Johnny et al. know how much we appreciate their efforts ... and try to steer business in Johnny's direction. To wit: Booklet and newsletter publishers would be wise to call Johnny's for a price quote: 518-828-6666.

11. Know when it pays to spend more. Priority Mail, at $3.20, sometimes costs us a bit more than first class, but we think it's more reliable, faster, and gentler on the goods than regular mail or UPS. Besides, since the Post Office gives us the Priority envelopes for free, we save the 20% an order that we once spent on jiffy bags.

We specifically ask for "Flat Rate" Priority envelopes, because they're not limited to 2 pounds for the $3.20. A lot can be fit into each packet, which saves us hundreds of dollars each year, and more than makes up for the bit extra we spend on shipping "light weight" titles.

12. Save a dollar a day. That's how much Marcy (whose Ace is a freelance research business), saved on long distance calls. She crunched the numbers for the various calling plans ... then switched to save between $350 and $400 a year. Not a bad day's work, huh?

Here's how you can do likewise: Look at your phone bills for a few months. How much do you spend? Do you make most of your calls during the day or in the evening? Are they mostly in-state or out-of-state?

Once you can answer these questions, call at least the three main long distance phone companies: AT&T, 800-222-0300; MCI, 800-444-3333; and Sprint, 800-746-3767. Ask for the calling plan that's likely to cost you the least. Tell each one what the others are offering. Then ask again.

Be forewarned, though. Comparisons aren't easy, since each carrier has its own peculiar set of calling plans that seem to change by the day. Maddening though they may be, don't let the complexities keep you from checking out your options, now, and from time to time.

13. For whom does the bill toll? If most of your customers live outside your local calling area, think toll free. It'll probably help you get orders. Your long distance carrier can piggyback an 800 line onto your current phone line. The monthly service fees are relatively small ($20 a month, or less). If you already have rollover lines, the 800 calls will come in on each line ... at no extra monthly charge.

14. Recycle to save money. We've been recycling every piece of paper here, for years, and reusing packing material, too. But we used to buy nice, white cardboard to protect the diskettes we mail out. Now, we cut cardboard to size from old boxes ... the ones we don't use for storage or for beating back the weeds on the path behind our garden.

Or take toner cartridges. You're spending too much money, and hurting the environment if you buy them new. Recycled cartridges cost about half as much, last longer, and often print blacker blacks. We get ours, hassle-free, from RDS (800-344-9951).

15. Are you and your business covered? Will your homeowner's insurance cover the equipment you use in your home business? If so, for how much? What if a client slips in your driveway? Get the answers from your insurance agent, and decide if special coverage is in order.

16. Take a spin on the original information highway. Reference librarians are great at ferreting out all kinds of information. For example, ask your librarian about the trade associations and trade journals that might help you learn about trends, suppliers, colleagues, and competitors.

17. Let there be light -- fluorescent, preferably. Although we've been negligent in switching from the expensive, energy draining, incandescent variety, don't you be!

18. When it's time to hire, start with students and part-timers. We've benefitted greatly from smart, hard working students, as well as from more experienced, and equally dedicated staffers, who choose to re-enter the work world while their children are in school.

Over the years, 5 of the best and brightest students at 3 local colleges have been computer programmers on The Banker's Secret Software.

They all earned money to help pay for college, and some got school credit, to boot. Although we paid them well, they cost us a lot less than what they'd soon earn in the real world. I hope you've benefitted, too, by saving a bundle on your loans, with the great, affordable loan and credit card software that Tom Lococo, Hekmat Abasi, Susan Budney, and Jenny Schopf have helped us develop.

19. Permission granted? Before you set up shop, ask your state's tax department if you'll have to collect sales tax ... and check with your city or county clerk to see if you'll need a permit or license for your Ace. Businesses that deal with food or kids, for example, usually require one. Ask about zoning regulations, too.

20. Pay your respects to Uncle Sam. Your Ace can help you save on taxes, with deductions for expenses like office equipment, supplies, travel, and publications. Keep expense records by paying with checks and credit cards. And save all other business-related receipts.

21. Get a pro in your court. Even if you've always done your own taxes, consider seeking out a good tax advisor, especially for the first return that includes your Ace. You'll save on taxes, and reduce the risk of an audit.

Ask your tax pro, or call the IRS (800-829-1040), to find out if you'll need a federal tax ID#. If you're a "sole proprietor," and don't have employees or a business bank account, you probably won't need one.