Part of Recommended Outdoor Gear by Mark Verber
Check out and read some good backpacking books at the library, check out gear information on the web, and the backpacklight mailing lists at YahooGroups. I have tried to call out notable low cost alternatives in my Recommended Outdoor Gear pages as well as providing links to other good sources of information. There is a nice chapter entitled "Ultralight, Ultracheap" at the end of the document Lightweight Backpacking 101. There is also as a forum thread discussing an ultra-cheap gear list and a nice posting about a $200 gear list. A few years ago there was also SGT Rock's $300 Challenge and the BPL ultralight / ultracheap challenge. In 2003 I helped a friend get into ultra-light backpacking for around $400. I have a slightly modified the resulting list to produce a slightly more generic Low Cost Ultralight Backpack Gear List. Antonio Manuel Abad created a $600 ultra-light gear list.
When possible use items that you already own rather than purchasing something new for backpacking. For example, you might have sports oriented clothing like soccer or bike jerseys which make good hot weather hiking shirts, running shoes with good soles can often be used rather than purchasing expensive hiking boots, etc.
You really should delay the purchase of items until you know you really want to commit yourself to backpacking. What should you do in the mean time? Check to see if you have friends who would be willing to lend you gear. Try to rent gear from local outdoor outfitter. For example, stores like REI or adventure travel companies like Outback Adventures rent a wide variety of equipment. If you are in school, see if you have an outdoor club which loans out gear. For example, Stanford's Redwood Outdoor Club rents many items a prices below any of the commercial outfits which rent gear. Even after you decide that like backpacking, you should think about the frequency that you take trips -vs- the cost of renting gear.
You can save significant money by making your own gear. In particular I would suggest using an alcohol stove unless you are doing snow camping. I would also think seriously about making a sleeping quilt (down or polarguard) rather than purchasing a sleeping bag.
When you do buy gear, make sure that you buy the right products for your needs. Otherwise, you end up having to buy the same type of item multiple times before you get the right one. So, make sure whatever you purchase is a quality product because no only will this be cheaper long term, but it will save you from the unhappy experience of having your tent, backpack, stove, etc fall apart miles from the trailhead. [I can tell you from experience that this is no fun!] Quality doesn't necessarily mean "name brand" or expensive, but you tend to get what you pay for, especially when it comes to sleeping bags. When it comes to buying things I would start with a good pair of foot wear (hiking boots, hiking shoes, hiking sandals, or trail runners). I would recommend a sleeping bag be your second purchase for three reasons (1) it will be useful whether or not you commit yourself to backpacking, (2) a good light weight sleeping bag is one of the best long term purchases you can make (3) a good night sleep can make a huge different in how you enjoy backpacking. The third item I would consider purchasing is a backpack if you have a good idea what backpacking style (ultra-light, light-weight, etc).
When shopping for gear, start by looking at Sierra Trading Post, Bargain Outfitters, and to a lesser extent Campmor's great deals section, Northern Mountain Supply Killer Dealers, BackcountryOutlet and REI's Outlet for deep discounts on high quality clothing and gear. You might also be surprised what you can find in thrift stores and on eBay. Don't forget that many of the items you use in your day to day life might work well on a trek. You might also want to check out the yahoo groups bpcheap where people share good deals and BackpackGearSwap.