Making music on a low budget has never been giving so good results. Nowadays, you can make decent noise by using free software exclusively. From arrangers to effects, synths to samplers, there's loads of software that can supply you with what you need. Provided you take your time to get acquainted with them, of course. So far, I have been using software from the following institutions...

Software

• Jeskola Buzz, tracker-style composer, effect and sound generator library. Typical installers include hundreds of plugins, each with its own personality and application, a VST(i) host and some VST plugins and a few samples, grouped into drumkits. A bit shaky sometimes, but I couldn't live without it.
• SynthEdit - wire your own synths. Requires basic knowledged of diverse synthesis types, electronics, logics and math.
• RCG Audio, makers of my favourite sampling plugin, SFZ.
• Smartelectronix, a community of developers that bring us nifty tools like the NyquistEQ, Ambience or ktGranulator.
• Jeroen Breebart, author of the Broadcast Processor compressor/autogain/widening plugin
• Tone2 made my current weapon of choice, the ancient first incarnation of the Bifilter plugin, which was Freeware back in the days. It comes with a wonderfully borked waveshaping limiter and an army of filter-related effects. The current Version 2 of Bifilter is still quite cheap, but I have to say, I'm cheaper. ;)
• Audacity, open-source, non-realtime sound editor. One day I'm gonna try and produce a song made only with Audacity and a bunch of samples. Or maybe I skip the samples. Who knows what Audacity will be capable of.
• foobar2000, a programmer's audio player. Has loads and loads of very cool features, including great usability while showing the most minimalistic user interfaces an mp3-player ever had. Excluding V0.2x of Winamp of course. Unfortunally, it is not for the faint hearted. Scripting sK1LLZ required for optimum fun.
• MP3TAG. Handy editor for all kinds of music file tags. Can even edit the APEv2 tags used by foobar2000.

Hardware

"Say ¥€$" - 0¥, 0€, 0$, this was one of my initial goals. I'm currently 1275.76€ away from it as I have acquired the following commercial products:

• Masterkeyboard MAudio Evolution MK-449C (I wanted a velocity input): 175€ (Jan'05)
• Keyboard Stand Collins DoubleX black (way too big for the MK-449C): 19.90€ (Jan'05)
• Yamaha Mixing Console MG10/2 (originally though for jam sessions only): 99€ (Apr'05)
• Cheap Sankai Guitar plus Strings worth half another Guitar (out of curiosity): 29.98€ ('05/'06)
• Logitech Dual Action Joypad (Experimental live improvisation controller): 22€ (Jan'06)
• Nintendo Wii Remote and Nunchuk (I just had to...): 59.98€ (Mar'08)
• Korg nanoKontrol (initially bought for controlling my fav graphics program): 66€ (Aug'09)
• Akai MPD18 (because the nanoPad was crappy): 99€ (Aug'09)
• Waldorf Blofeld Keyboard (I was in love...) 699.00€ (December'09)
• Collins DoubleX Extension for a second keyboard (should be obvious. got the silver one. meh.) 15.90€ (December'09)