Don't feel bad. A ghetto rig was all I had for years. While my recordings didn't sound as good as I would have liked, I learned a heck of a lot - especially the value of creativity (like using a broomstick, a folding chair, and some duct tape for a boom stand)
For most things, unless you've got a small local music store hookup (like Mike Carey's in the Detroit area), you're left with Guitar Center, Mars, or mail order (or rolling the ebay dice).
I've learned over the years that scrimping on important stuff like cables and monitors is going to cost you more in the end. I ended up spending tons of time tracking down problems and replacing most of it with quality stuff later. Money wasted. However, if that's your only choice, it's better than nothin'.
Roland MA-8's for monitors. You can find them on ebay for about 50 or 60 bucks. They're not perfectly flat, not very loud, and they have crappy low-end, but they're powered and they're a step up from cheap-o stereo speakers. Add a cheap-o powered sub and you're in business. Ghetto fabulous
Mixing with headphones is very misleading when you're trying to mix (especially the exaggerated stereo separation and low end). Try completing a mix, then burning a CD and playing it in your living room or your car - where'd your mix go?. If you understand up front that it will be incredibly frustrating, give it a go until you can afford something better. It's good to check your mix on headphones, but certainly not to do any fine tuning.
Most importantly (IMO), spend some time listening to regular CD's you're already familiar with on the monitors you're going to use. It's important to develop a basis for comparison and let your ears get used to them.