In order to get most bang for your buck, you can use many different ways. Depending on your needs, personality and plans, you might extend your trip or ability to choose more interesting tours.
Here are my best tips:
1) Compare prices, some people will try to get more money from you, than it is worth. Thus, you should always try to bargain a bit. If possible try to get some comparing prices, this works best on big markets, since most of the products are the same. (See Bargaining for further information.) Ask natives or experienced travelers, where to save money or what is an appropriate price. Some people are just good in getting more for their money. Watch and learn.
2) Look out for good opportunities and team up, most of the time you can save money by grouping with other people. Taking a rented car alone is quite expensive with another person you pay the half price..
3) Save money regular – yet recurring – things like taxis and food. South America is full of good restaurants. It is more common to eat in a restaurant/cafe in South America, cause it is cheaper and sometimes having a kitchen of your own (a friend from Peru told me that.) Yet, these people don’t eat in tourist restaurants ;) Another way is to cook for yourself, since some hostels provide a kitchen for free. Ask for the dish of the day (“plato del dia”) in restaurants.
4) “Work” at a youth hostel. This depends on the country, in Peru it is quite easy to get a job at a youth hostel. Depending on the hostel, you can get accommodation for free, lowered prices on products and tours (no commission), free bed and some other stuff. In Arequipa I lived with 1-3 bucks a day.
5) Don’t do stupid things. Be careful, leave your valuables in a safe place, especially when going out. Thus, you lower the chance of losing money and getting things stolen from you. Even if you don’t plan to get drunk, it is always wise to keep a limited amount of valuables with you. I have seen people go out with their credit card, even though you can’t pay with it most of the times. Take a youth hostel with a locker and lock all your valuable stuff up.
6) Wait with buying souvenirs til the end of your trip. Very few things are unique in South America if it comes to products.
7) Have a plan (or at least an idea) on what you really want to do and where you want to go. Zig-Zagging over South America is pretty easy and can be awesome, but it might lay heavy on your budget. Taking a bus cross country is pretty cheap related to the traveling distance, yet it sums up pretty fast. Also you might regret spending money on “nice” tours, which are not that great.
I also recommend to take a look at the more general 6 Tips on How to Avoid Unexpected Spending On the Road from the Art of Backpacking Blog.
Enjoy your trip and please send me your best tips!
Further Information on about keeping your budget low
The following books all contain special information for several places, also including information about value and price. They are organized and written especially for backpacking. Thus, you can easily read them while you sit on the plane, bus, train, etc.