Personal information permissions may sound scary, but more often than not they are harmless. If it's a social or a messaging app, like Twitter or Foursquare, or a home screen contacts widget, then the permission to read your contacts makes perfect sense. The rule of thumb is if an app doesn't have any social aspect, there's no need for this permission. Some PIM or task management apps may need a permission to read from your calendar. As for your location, well, if the app in question for example tells you information about finding things like businesses, it needs to know where you are. Some apps may get their revenue from location-based ads.
As the other poster have said, look at the ratings, read the reviews, and use a bit of common sense. If still unsure, ask the developer directly. If they don't respond, move on. I'm a dev myself and I often get messages about one of our apps that makes extensive use of location services as well as Google Analytics. We always try to respond calmly and explain why we need the permissions in question, that we're not collecting or sending any personally identifiable information. However some people are so paranoid when it comes to personal information, that there's literally nothing you can say to ease their mind. I'm not saying that there's no malicious apps on the market, only that in reality most developers have no bad intentions, they just want to make apps that make them a little money.