First of all, don't sweat the purples. They are nice to have, but not worth the hit to your pocket. And if you get a world drop, it is almost always better to make a fortune at the Auction House (when possible), than to actually wear the item and replace it a few levels later. This is particularly the case for practically useless items like the ubiquitous Icemail Jerkin. I think I've had 5 of these drop for me, usually in Feralas, and the best thing you can do with it is to hope for a purple-crazy sucker on the AH. Basically greens are fine for leveling and try to pick up blues from quests and instances when possible, otherwise they are not worth the extra cost.
When deciding what quests to do, definitely check out the quest rewards to see what the rewards are. Quests offer some decent leveling greens and blues. If you are Horde between level 10 and 20, the Ghostlands quests and the accompanying Tranquillien rep will outfit you nicely. If you are 58 to 70, the Outlands quest rewards and drops are huge upgrades over the old world gear and you probably won't have to spend any money on gear at the AH during this time.
Instances are great for gear, gold and experience. But the instances you encounter while leveling can be frustrating timesucks with the wrong group. And we just don't have the time to waste. If you have competent guildies/friends with characters near your level and similar schedules, you have hit the jackpot. Otherwise, your best bet if you want the instance goodies is to get someone to run you through them. Personally, I think it's dullsville to be run through instances, but The Spousal Unit and I have had some fun taking turns running each other's alts through dungeons for gear.
Professions are a great way to outfit your character while leveling. If you keep your professions at or above your level, you will always have goodies to wear or improve what you are wearing. (If you are a mage, see the Arcane Brilliance series on professions.) Also, pay attention to the professions your guildies are grinding. They are usually more than happy to provide you with free crafted gear rather than vending all of their products.
The Auction House
Every 10 levels or so, take inventory of your slots and see what items are pushing obsolescence. Some blues can be worn for 20 levels, but most greens should be replaced after no more than 10 levels. Then go to the AH with a slot list and shop for greens that are improvements and are at or a level above you. Again, don't waste money on Bind on Equip blues and purples. Your cash is better spent on crafting and mounts.
If you want to spend some time and effort micromanaging your gear (which can be fun), then hop over to the WoW Armory and find your character. Mousing over each equipment slot will show you the full stats of the item you are currently wearing along with where you got it. For example, I'm wearing the Robes of Arugal on my priest, which I got from Archmage Arugal in Shadowfang Keep and has a medium drop rate. If you mouseover the arrow on the outside of the slot, you get a button to push that will check for upgrades. If you don't like the level range of what you are seeing, you can click on Show Item Filters and adjust the search to suit your needs. From here you can make a shopping list with which you can plan your questing and/or shopping.
Of course, each class has different stat requirements, but they also have different dependencies on their gear quality. For example, I have found it much more important to keep the gear current while leveling my rogue as opposed to leveling my mage. While my advice above is great in general, you should also try to keep up with what stats are best for your specific class and spec. Keep reading your weekly class columns here on WoW Insider and monitor the The Daily Quest for articles on other blogs that will help you make your gear decisions. Using break times to keep up on the latest will save you time and money during your playsessions.
Have fun shopping for gear and enjoy your second Chocolate Day of the year! (There are four. Some may celebrate today as Easter.)