I agree that you can have a great time at home with friends. I recommend the no more friends than her age, and remember it might be a good idea to make it an even number of guests so no one feels left out.
Start with what she likes, for a water lover, you can do an aquarium theme, whale shaped cake (you can find the pattern online) blue jello with swedish fish in it, and games with a twist toward fish (find games online and just add blue balloons, or paint a cardboard box to be an aquarium, etc.
I love the dress up clothes for a tea party.
Instead of games, you can do a craft table and they can make foam crafts out of stuff you buy at Michaels, or you can get all kinds of craft ideas, this will keep them busy for about 45 min, maybe.
I know this isn't too specific, but if you tell us what she is into, us mommies can probably come up with some pretty cool games and decorations for cheap.
You may wnat to do a mid day party or late evening so that you don't have to really "feed" them, this will cut down on the cost a lot. Or, if you do a tea party, you can make some little sandwiches with the crust cut off. If you don't have a tea set for her, this can be her present from you.