Well, nearly half of it is transportation, and that’d be the first place I’d try to cut. Second, $20 USD per night for hostel probably isn’t enough with the USD/EUR exchange rate the way it is (and likely will be); $25-$30 would be safer to budget. Drinking for $20/day will depend where you plan to drink—at bars, it won’t last long; from supermarket—to have a “pre-party” before you go out for a few—might be do-able on $20/day (most difficult in Finland and Sweden).

It’s been a while since I checked rail pass prices, and I didn’t even realize there was one for $999 USD. I thought the most expensive was about $6-700. Are you sure you’ll need that much rail pass? Would point-to-point, cheap flight hops, or bus (or bus passes) work as well and save you significant money on some portions—so maybe you could go for a cheaper pass?

Also, run your travel dates through www.bookingbuddy.com if you haven’t already and try to check as many sources there as you have time for—especially Mobissimo, Kayak, Farechase, and Hotwire. Keep in mind that outbound before July could be significantly cheaper; before June 15 possibly cheaper than that; and before June 1 could be even cheaper still. This is because of different dates that airlines begin full peak-season airfare pricing. Are you students, or under 26 bychance?

—— upated
Ok, 24jun-16aug $1176 airfare total, SAS/Swiss SEA-HEL round trip. Found with Orbitz. Already saved you $324. However, open-jaw, or returning from a different city at the end of your journey (Rome perhaps?) might be well-priced, too. Can search those well with Mobissimo and Kayak.

tbird,
 
Well you’re going to have an awesome time in Europe…I’m jealous! I agree with Don that $20 per night isn’t realistic. In the summer you’ll spend at LEAST $25-30/night. $20 is probably enough if you drink at your hostel or get alcohol from a store instead of at a club. But alcohol costs really vary country to country. In France you can get good wine for 5 euros that you’ll pay more for anywhere else. Same with beer in certain areas. I was in europe for 2 months and spent about $6000 including airfare, rail pass, food, alcohol and everything in between. Are you sure that the rail pass is $999? That sounds incredibly high! Try looking on another website. How many countries/cities are you planning on visiting with the railpass? Those airline tickets sound insanely expensive! Wait for prices to come down…that’s ridiculous. I met a guy from California who spent $650 on a plane ticket from San Fran to europe 2 weeks before he left. I wouldn’t suggest waiting that long, but those prices HAVE to come down. But it will most likely be cheaper to fly into Rome than Helsinki. Also, remember not to count the cost for a hostel the nights that you will be traveling (if you are in fact planning on traveling overnight). But if you do this you’ll still have to pay for reservations for a couchette which comes out to about the same price. Also, you’re not going to drink EVERY night. I guarantee it. I did more than my share of drinking, but with as much walking and traveling you’ll be doing, sometimes you’ll need a break just to get your energy back. Traveling takes it out of you…especially if you’re like me and prefer to walk everywhere instead of taking subways.

I agree, wait for the ticket prices to go down! Anything you look up this far in advance for next summer is going to be insane. I like to wait till around the 4-5 month mark at least before buying a ticket. You will notice a significant difference. And aether is right, if you drink every day the whole trip you are going to get increadibly dehydrated (I had that problem in Germany).
 
Also, you’d be surprised how much you can save while you’re there just by simple penny-pinching. Walk instead of taking buses, by food and drink from the grocery store instead of eating out and going to the bars everynight, you’ll be surprised at what you save.
 
Once you have set yourself an official daily budget, while you’re there only take out the money that you have budgeted for the day from the ATM in the morning. That way, you have in your hand exactly what you have to work with for the day. If you don’t spend it all, you can save it for another day when you might want to go out and treat yourself.
 
Check out railsaver.com and type in your itinerary, and it will tell you what the best way to buy your tickets is (rather you should buy a pass or point-to-point tickets). You might find that there is a good deal on a pass for just a few of the countries you are visiting, and you could buy that one and do point-to-point for the other countries. Work out all of your options first.
 
Good luck!

What are the dates you are thinking of traveling? People will be happy to help you try to find cheaper airfare, or suggest alternative solutions. No guarantees, of course.

25 Euros per night for a hostel is not at all rare, and that is currently about $35 USD. On the other hand, I have a hard time imagining $20 USD per day on drinking, and everyone saying it’s not enough – that was basically my week’s budget at about 5 drinks per week. I think Finland is an expensive place to drink, though – so if you are going to bars and having several drinks every night, $20 USD probably is not enough.