Hi S.,
There is absolutely NO need to spend so much on a first birthday party. Why don't you have it at your house? That is what we did for our daughter last year.
We made our own chocolate covered pretzels, in pink of course, went to the dollar store for decorations, and got a birthday cake from Shop Rite. Many stores give big discounts for first birthday cakes - you just need to take in your child's birth certificate.
To entertain the adults, I made up muliple choice questions about our daughter and posted them on the wall. It was cute to see everyone try to see who knew our daughter the best. The prizes were small bags of m&m's that we ordered from their website - they had pictures of my daughter on the m&m's along with happy birthday messages.
I also printed out 12 pictures of our daughter - one from each month of her life to that point. We posted the pictures on the mantle. The guests had to put the pictures in order from youngest to oldest. The winner got a personalized m&m bag.
It was a blast. There is no need to go overboard. Time the party so it does not coincide with a meal time, and you can get by with munchies and sodas/drinks. It only needs to be an hour and a half to two hours, unless you have a clown, or something else like that scheduled.
Then, the relatives from out of town can go out to dinner that night with you, your husband and your little one. Everyone can be responsible for their own expenses. Still nice, but saves you the headache and the money.
It's funny how the tradition of extravagant first birthdays still carries on. Just do what you think is best for you and your family.
If you decide to just have a small affair with the three of you, that could be wonderful too. Afterall, it is all about that picture with the cake! :)
Whatever you decide, HAVE FUN and do something that you can enjoy every minute with your little one.
Good luck,
L.