Your money is undoubtedly the most important component of your backpacking trip. Without it you wouldn't be going, and if you run out or lose all of your money while you are traveling, your trip might be in jeopardy.
You also need a strategy for dealing with money while on the road. Your money options include cash, ATM cards (Automated Teller Machine), credit cards and traveler's checks, each of these payment methods having pros and cons:
Although easy to use and always accepted, cash has one major drawback -- once lost or stolen, it cannot be replaced. It is a 100% loss of your funds. And this is the great strength of cash alternatives like ATM cards and traveler's checks. If they are lost or stolen, they can usually be replaced within a short period of time and with a minimal financial loss. Carry little money and stick with ATM and credit cards for this reason.
Credit cards are an excellent way to pay while you are away. They offer a virtual bounty of money at the blink of an eye (assuming you don't already have your card maximized) to cover any financial emergency. But today's credit card programs offer much more than just accessible money - Credit card companies can serve as a travel assistance service, help if things go wrong during your trip and offer emergency transportation and medical assistance.
There is no doubt that traveler's checks have lost some popularity as of late due to the increased use of ATM and credit cards. Traveler's checks were always the 'safe' way to carry money to ensure that it was replaceable if lost or stolen. But with the popularity and convenience of 'plastic money', who needs traveler's checks? This doesn't mean that you shouldn't take any traveler's checks. Just take a couple hundred dollars worth of them for emergencies.
Bargaining, bartering, haggling - however you call it, it is a required skill in much of the third world. The golden rule or bargaining is to keep a smile on your face and the atmosphere friendly. Just think of it as a game. Getting a 'fair' price is the goal, getting an excellent price is much harder. Just remember you can always walk away.