yea, i bought my furniture new, and i paid under 500 by using ikea and office depot. It's well within reason to do so.
Futon's are actually quite pricey, if you're concerned about space, get the loft bed from ikea. This of course will knock out about 250 from your budget (150 for the frame, 100 for the mattress). Another 100 on any desk. Depending on the shelves you need office depot has two shelve bookshelves for 14 bucks that hold a decent amount of books, i have 3 of them (since they were only ten bucks when i bought them) and use them everywhere. Also, my chair cost me 50 bucks as it was on sale.
if you're near a campus, definatley check that out as students are always looking for furniture/looking to sell furniture. Most of the time they got it for cheap, so they'll part with it for cheap.
g'luck