Italy can be done on a budget with planning. Rome and Venice are the most expensive cities; Florence and Naples are cheaper. Budget travelers spending €70-90/day can manage on hostels, supermarket lunches, pizza al taglio, and free entry to many churches.
Mid-range travelers (€140-200/day) can stay in comfortable hotels, eat at proper trattorias, and visit major museums. Pre-book the Vatican Museums, Uffizi, and Colosseum to save hours of queuing. Trains between cities are reasonably priced; book Trenitalia advance tickets for discounts.