How important is your data, and how much is it worth to you? For many people, an external hard drive works, however they make the mistake of not keeping copies of their data in multiple places. An external hard drive can fail just as quick as one inside your computer.
There are many ways to go about this, all of them have a cost. First, storing your backup locally (even in a safe), is not secure long term storage. A bank safety deposit box is a good start for off-site storage and it goes up from there.
You might also consider something like Mozy or Carbonite as another backup solution. For $50 a year, it gives you a second backup in addition to the hard drive storage. Personally for really important data, I wouldn't use such a service as my only option, but it is a good start and a decent backup to your backup if you're on a budget.
One issue to keep in mind is that you have no guarantee that a hard drive (or DVD-R, or tape, or anything else) stored for several years will work when powered back on, so how many copies of your data do you want to keep? Do you keep multiple versions, or are these static files? Do you reuse your backup medium, or do you archive the backup forever and make new backups?
No matter what option you choose, they all have failure points. Do you have a backup of your backup, and do you test your backups to make sure they work? Nothing is worse than thinking you have a backup, only to find out that you really don't.