Tom, a new hard drive is always a good investment. If you don't have enough room to backup your data, you don't have enough storage.
These days, I don't see the need to pay for partition manager software. Disk Management, which is included in Vista and Win7, is pretty good for most operations. You can extend and shrink volumes, create and delete them. And, where Disk Management refuses to perform some operations, diskpart.exe can be run from the Recovery Environment and do more. The only function you don't get is the ability to move a partition. However, every partition manager that can do this recommends that you backup the partition before attempting it. Well, once I have imaged such a partition, I can then use Disk Management (or diskpart) to delete it and re-create it in a new location. Then I restore from the image. For anyone who doesn't have enough space to image a partition, see paragraph 1.
Cost of additional software: $0. Being able to do your own partitioning: priceless!