A lot of us are budget conscious these days and throwing an extravagant birthday party is just not on the books. One of the first rules of keeping the party budget in check is to throw the birthday bash at home and skip rental costs. Make invitations yourself or use online invites (which will also save you the cost of stamps!). You can typically skip a lot of the paper decorations in lieu of making your own, too -- either draw them or print them out on the computer.
Also consider saving money by keeping the menu simple and baking the cake (or cupcakes) yourself. So what if you're not a cake decorating expert? All that matters is how it tastes and that the birthday boy or girl is happy!