I have made a hobby out of buying yarn
at discount prices.
I don't think I ever paid full price for yarn. I check Littleknits every day because she has great deals. I have a boatload of King Tut cotton (may fave cotton!) that is 45% off the price in the stores. I also got a lot of Noro (Big Kureyon, Iro, Transitions, Silk garden, Lily) at really good prices.
Discountyarnsale.com is good too. Last year I bought a bunch of Cash Iroha there pretty cheap.
Web's, yarn.com, has a discount program where you get 20% off if you buy $60 worth of yarn and they have some really excellent yarns on sale too.
Sarahsyarns.com has Jaggerspun Zephyr in lace weight and DK weight dirt cheap. I am wearing a Zephyr DK sweater right now that cost me under $30 to make. Her service is excellent, I have gotten orders the very next day!
TLC cotton plus is a wonderful cotton/acrylic blend that is only $2.69 a skein at Joannes. Good yardage (178) and great quality in a bunch of beautiful colors.
You could figure out how many yards you need for your pattern in the correct gauge and go from there. Yarndex is a great resource for yarn info too.
Some other great sites: discontinuedbrandnameyarn.com, yarnbythe bag.com
Ah yarn! Wonderful yarn!