In my current situation, everything I use to record is cheap or free. Here are some links to stuff I’ve found very helpful for my recordings.
Gibson SG Special Electric Guitar Natural Finish – This is the electric guitar I play. You typically save a lot of money on the natural finish, and I love the look anyway. Mine has been so versatile, and it plays like a dream.
Amplitube Custom Shop - I have a POD 2.o, which I list here, but lately, I rely more on great amp modeling VST plugins like the Amplitube Custom Shop. All of the electric guitars in the song in this post are run through the Amplitube plugin.
Line 6 POD 2.0 - One of the more expensive items in my collection – it is a very convincing amp modeler. All the effects sound pretty good. The POD makes it easy to have a full range of guitar sounds for your records, and it fits in a backpack. I’m not sure it is the best thing you could spend $200 on for recording your guitar. I just happened to get a great deal on a used one.
Akai LPD8 Laptop Pad Controller - A small portable finger drum pad. There are 8 pads you can set to any MIDI note you want. I do all my drums with one of these. With a DAW like Reaper, and a nice VSTi drum set plugin, you’re in pretty good shape.
Behringer Xenyx 502 - This is my mixer. It has a pretty nice sounding built in mic preamp, which makes it great for single track home recording. Plus, the extra channels give you options for live stuff. It comes with phantom power so you can use condenser mic’s, or if you’re like me, just a trusty old Shure SM58. Please note, you’re going to have serious latency issues if you record with this alone through your build in soundcard. This can be solved cheaply with the Behringer UCA 222.
Behringer UCA 222 - This is my “sound card” – an ultra low latency USB interface. If you’re having latency issues, and can’t afford an M-Box, this is the most affordable solution I’ve found. It’s very simple, and it works great! Oh, and best of all, under $40! You can use it without drivers, but you’re really going to want to find and download the ASIO drivers for it.
http://www.reaper.fm/ - Reaper is my favorite recording software. It is a full featured DAW that easily rivals Pro Tools, Audition, Logic, and Garage Band, and the cost is still well under $100. Reaper makes it easy to get started right away recording audio, MIDI, or loops.
http://www.dskmusic.com/ - This site contains some of the highest quality free VST plugins I’ve found anywhere. Build a collection of these, and it becomes really easy to fill out your recording with strings, pianos, drums, etc.