Planning for a Disney trip is a bit of a paradox. You don't want to spend so much money that you regret going on the trip once you get home, but you don't want to scrimp and cut corners while you're at WDW and feel like you wasted your time there.
Some costs you can't control at all, like admission prices. Other things you have some control over, like airfare and car rental expenses, because you can shop around and get deals/discounts. Food and souvenirs are a big part of the budget, but are also controllable. If you're trying to cut costs, it's easy to avoid the really expensive meals. You can pack breakfast bars and late-night snacks in your luggage, and cut that expense down. You can also avoid the expensive sit-down places, or limit them to just one or two meals of the trip. If I'm going to Disney on a budget, I'll trade an expensive meal or two for an extra day in the parks, easy.
I find I don't have much of a problem with souvenir spending at WDW. I usually buy one t-shirt, some postcards, and a few other small knicknacks. Of course, kids can complicate this a bit. From experience, the best way to deal with kids is to ration their spending via Disney Dollars. Start the trip with a supply of these, and ration them out a a certain rate. Don't let the kids spend all their money at once though - if they want something big, they have to save up. It's kind of like a Disney allowance, $10-15 a day for each day of the trip. Give the kids their money in the morning when you leave for the parks (or if they're too young, hold onto it for them, but let them see those Disney Dollars first). They can blow the full allowance each day, or save it up for something big at the end of the trip. I think it's also easier to say "no" to the child when you give them control over their own spending.
Hotels are hard to budget in, because most people have strong feelings on whether to stay inside WDW or not. If you stay in the world, you're going to pay for it. Personally, no amount of saving is worth the hassle of driving to the parks each morning from the hotel, but that's just me. At least with the new All-Star and Pop Century resorts, people who want to stay inside WDW have some lower cost options. If you're willing to stay outside of WDW, then you can get the cheapest motel room that you can stand (you don't spend much time in the hotel room anyways, right?).
My own experience is that I want to go to WDW and not worry one bit about money. The best way to do this is to save, save, save in advance (instead of paying for it all later). Also, it helps to pre-pay as much as you can. Get your airfare and tickets in advance, and if you're staying in WDW, prepay a good chunk of your hotel bill. You'll feel much more confident that your expenses are in control, if all you have left to spend is money on food and merchandise, and you know the exact amount of the hotel bill.