I believe that it is easier than you think to travel cheaply. Here are some suggestions for spending as little as possible when travelling:
Before you go: Do not pay a travel agent to book everything for you. Go to the airline´s site, buy your ticket and then book a hostel.
On the road: Take long distance buses overnight. If you are going to be on a bus for nine hours, you may as well be asleep. This way you can save the cost of a night of accommodation. (See Staying Safe for more about why I take overnight buses.)
In your hostel: Hostels tend to offer rooms with different amounts of beds, at different prices. Chose the room with the most beds, and pay less for more chances to meet new people. Take ear plugs and an eyemask to sleep undisturbed!
Food: Do not eat or drink in a restaurant, or buy anything from a street trader on the main square of a city. You are in tourism central and will pay a tourist price. Walk away a few blocks, and find a restaurant full of locals -they will know if it´s good! This way you pay less for good food and a more authentic experience.
Don´t eat out every night. You wouldn´t do that at home and it gets expensive. Most hostels have a communal kitchen, so buy some supplies to cook for yourself. It´s also fun to look in supermarkets and see what different foods they have in that country.
In poorer countries, often the local food is the best, think of it as it the food of the people. Soup in Bolivia, or ‘soupita’ as everyone called it, was about £0.50 a bowl and was delicious, thickened with flour and containing chunks of potatoes, vegetables and meat. Try the cheaper food!
Shop at markets and street stalls, but check that the food preparation area looks hygienic! For this you will need to have broken into you large bank notes, so that you have small change. (Coins often seem to be like gold dust in developing countries and people may refuse to sell to you if you only have a large note.)
Activities: It is possible to go a day without spending any money (other than on food and accommodation). It is free to walk down the street and to sit on the beach. Look at the architecture, the cars (Cuba is perfect for this), the advertising, what the people are wearing, what they are doing, listen to what they are saying, sit on a bench, enjoy the sun, I could go on. You don´t have ´do´ every tourist site just because it is mentioned in the guide book. Often you have to pay to for the privilege, and do you actually want to go up that tower, or visit that weapons museum even if it is the largest in the continent?
Personally I do not take city tours. I never understood why anyone would pay to be told where to go and what to think. (See my post Staying Safe for more about why I don’t take city tours.) Get on a bus at one side of a city and take it through the centre, so that you can check out the main sites without walking among other tourists, right to the end of the line. (Tram 2 in Budapest is great for this). It is much cheaper than paying for a tour and working out how on earth you buy the bus ticket is always rewarding. You can sit with, watch and listen to local people along the way.
In a city: Do not display your wealth. Taxis in South America generally do not run on a meter, and often small shops do not display prices. The driver and the independent trader will make up the price according to what you look like. Don´t wear branded clothing, instead dress down in plain clothes, and put your fancy camera away. Hopefully you will not be perceived as being rich and you will not be ripped off (See my post Staying Safe about displaying your wealth.) Look at how the locals dress and try to blend in.
Do not be afraid to negotiate a price. I try to bargain whenever possible and although I feel as uncomfortable haggling with poverty as the next person with a conscience, I do not appreciate being charged more simply for being foreign. So keep your eyes and ears open. How much did that local in front pay? That is the correct price.
A few months ago I contributed to a travel blog by Luke Durbin. You can read the article here. I have included some content from that interview in this post.