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Chop Logic
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And stick your shit in there and never let anyone know that's where your bank cards, passport and ticket home are.
Like not to be a paranoid asshole, but pickpocketing is waaay more common in Europe compared to North America, and you just don't want to be without your passport and your ticket home, ever. Also you don't want to go through the pain of replacing a bank card when overseas.
EDIT and keep that shit secret if you stay in a hostel - you're both (for the most part) undocumented tourists so you're the perfect victim surrounded by people who can safely assume they can hop a train and never get caught
Let's see:
Is your $1500 going towards visiting your cousin? If so, find out how much it will be to get there. I'm assuming your cousin can provide free food, lodging, and transportation.
Yes; however, it may be insufficient for transportation costs. The rail system is expensive and planes are often cheaper. Additionally, it depends on what cities you'll be visiting. For instance, Geneva, Switzerland is the richest city in the world; all of Switzerland is expensive since they pay so little taxes. A measly sandwich in Zurich is $6.50. You'll find that you can save enormous amounts of money by eating PB&J. Decide what you want to spend your funds on. Do you want to experience local cuisine? How about clubs? Local sites?
I also recommend spending the extra $10/night to have a private hostel room solely because of security. Many hostels advertise having safes, but that may mean a safe the entire room has access to. Others will take your belongings behind the desk, ask what your contents are, and you get a ticket that only you can use to reclaim your bag or item. Don't think for a second that something you've brought is something people won't steal. My friend had a jacket stolen; seems like something big one wouldn't steal, right? I suggest getting a lock for your bag so you can keep your clothes safe when you're gone and checking anything pricey like a laptop with the desk or put in a safe.
The trains can be relatively inexpensive or extraordinarily pricey. Some rides are 20 euros, others are hundreds of euros. It depends on where you're going. All I can say is fuck RailEurope. Their customer service consists of incompetent monkeys that are incapable of giving refunds. They gouge prices and even charged me for an additional ticket I never purchased; when I asked for a refund, I was told there would be a $56 processing fee, I'd need to call a number (costs money so I'd lose more than I'd be reimbursed), etc. I cannot recommend them but I do not know what to recommend instead. Just know their prices are gouged and their customer service is beyond shitty. Also, don't expect your trains to run on time. Get there really early. They sometimes close the doors five minutes before the trains depart. Other times the trains are late and you'll miss your next connection, but the train stations are generally good about noting on your connected ticket that your previous train was late, so you can just catch the next one for free (this happened MANY times to me). Delays and cancellations are common with the snow, which you may experience if you're traveling in the early months of the year.
I stayed in a couple of hostels during my 3.5 months. I shared a private room with a friend. They ended up being about 30-40 euros/night. There's no real "average" price - some are dirt cheap and others are very expensive. There are great websites to check hostels. I suggest Hostel Bookers and Eurotrip, especially the latter. I used Euro Trip and found all of my hostels that way. The best-located hostels are the most expensive, obviously. In some smaller places, like Venice, the location doesn't matter much.
Look at user comments on those websites. They're pretty accurate. If you need any other advice, ask away
I would not suggest a Eurorail pass unless you really like smaller towns, want to cityhop every couple days, or you don't want to plan more than a couple days ahead - with your budget that would probably be ill-advised. Also, while the German and Scandinavian trains are clean and on time, Hungarian trains were pretty sketchy and I would guess that Serbia and surrounding would be similar. You're better off flying RyanAir or EasyJet, picking 3-5 cities.
For lodging, I generally stayed in a hostel dorm with 6-10 beds 6 nights a week, with a private room once a week. Dorm rooms with 20+ beds are the cheapest, but people are always going in and out and it can be hard to sleep. I never had any troubles in a 6 bed room. Price will vary strongly by the country you're in - I paid 13 euro in Barcelona, 7 euro in Budapest, and 40 euro in Zurich (admittedly weekend and w/o much notice). You need to be conscious of security, but almost every hostel has lockers in the room (but check before you book) and the better ones have keycards that provide some limitation to access. Bring a good padlock, check reviews to make sure the lockers are decent, and keep your passport on your person at all times, but I wouldn't be paranoid about getting a private room. I mostly used hostelword.com for booking, never had a problem.