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Just because you are looking to save a few bucks doesn't mean you can't enjoy Mexico vacations. In fact, students can often visit Mexico and stay in Hostels for cheaper than American or European youth hostels and still have a banner time.
When you travel Mexico, you'll find prices are relatively cheap compared to most of the other top tourist destinations around the world due to the high exchange rate of the US Dollar to the Mexican Peso. By picking a three star hotel instead of a four star, you can often save 20-30% of your costs.
*One thing you should not cut from your budget, however, is bottled water costs. If you do, the price you pay in Mexico physically will be much greater than you can possibly imagine.