The main thing in birthday parties is to keep them SMALL. In fact, for younger kids, small is less stressful and less chaotic. It gets expensive only if you overdo it with 20 kids (and 20 goody bags) and a professional entertainer of some sort, or a paid venue like an arcade or bouncy house. Kids do not really care about having the whole class of kids they don't even really like. And since your kids' birthdays are either during summer vacation or just around the time school starts, you have the added advantage of sending out invitations before everyone is surrounded by huge groups of kids.
Kids think birthdays are special if they are the center of attention and the focus of the day. They don't need parents who are hugely hassled with the delivery and expense of bounce houses and farm animals and so on. Some of the best parties we had for our kids involved the typical games from the past generation that most of today's kids have never seen. A number of our neighbors have done the same, and all the guest kids are blown away by how fun things are!
Go to the library and borrow a book that details some of these games and the rules. Many of them involve common household items. The 7 year old can have sack races (use old pillow cases or just take an old sheet and cut it into sections if you are handy with a sewing machine. You don't need to finish the edges.) Have an egg toss outside and just have a hose for rinsing kids off (tell the parents to send the guests in bathing suits or with a change of tshirt). If you use water balloons, you have to pick up all the pieces because they are hazardous to wildlife and birds. Have potato races where they carry a potato on a tablespoon or wooden spoon. Do 3 legged races and wheelbarrow races. Be sure to include prizes for things besides the fastest - things like "most unique carrying technique" or "fewest drops". We also did bean races - kids picked up dried beans in a spoon and transported them from one cup to another. I forget what you call those relay races where the kids wear a few articles of clothing, go to the other side where a teammate awaits, and then they have to take off the clothes and dress the other one. Use anything you have on hand - hats, vests, blest, a feather boa, Mardi Gras beads, anything - everyone has the same number of items but not the same things.
For the 4 year old, go to the craft or party or discount store and buy a bunch of those plastic eggs they have around Easter time, and put a few small prizes or candies in each one, and hide them around the yard or the house - in a flower pot, behind a log, in the rain gutter downspout, or inside on a bookshelf, under the couch, behind a waste basket. You can take away the competitive aspect by giving each child a color and putting a sticker or an index card of that color on a collection bag - then they kind of split up, but overall they can work together to help everyone get their own eggs. What's inside becomes the prize - no additional goody bags.
You can also get little picture frames, either wood or foam. They can glue on shapes - foam shapes for the foam frame, or wood shapes or even different shapes of macaroni. Use white glue and let it dry while they are doing a game. An adult can spray paint the wood ones (right on top of the macaroni shapes) and let everything dry while they are playing a game or having cake. If someone takes pictures during the party, you can email them after the party and let the families decide what to print out and save. For kids, even a color picture printed on regular paper is kind of fun. Or they can use the frames for any other photo they have at home.
You can do a similar treasure hunt for the 7 year old - write up some simple clues that direct each child to his/her prize destinations. You can put an adult with each team to help read and interpret. We did sort of mysterious clues or little rhymes depending on the ages of the kids. Or do a scavenger hunt around the house for things like a pencil, a paper clip, a key, etc. Leave items around but not in logical places - tests their powers of observation.
This requires planning but so little expense. You have lots of time, and you probably have a lot of the stuff lying around. You can also do stuff like make vests out of paper bags turned inside out, hats out of newspaper, etc. - all those books of instructions are available in the public library for nothing.
Small parties also allow the birthday child to open a handful of gifts, learn to say thank you, without getting overwhelmed and greedy. The guests get to see the child open the gifts, which teaches them to enjoy giving pleasure even when they aren't receiving anything. Kids can learn to write (or for the 4 year old, dictate) thank you notes, a very critical skill. The problem with large parties is that no one wants to sit there while 20 gifts are opened.
It's not only fun, it sets a good example for kids that the joy is in having a party is not the extent of the extravaganza or the expense involved, but the social joys and the games.
