What cheap materials should I practice on before cutting real wood?

The principle

Do not commit expensive stock until the machine, your settings and your workflow have proven themselves. Every early mistake is cheaper in practice material, and the mistakes are the point.

The practice ladder

1. Rigid insulation foam (XPS, the pink or blue board): zero-risk toolpath verification. It cuts at silly speeds, cannot hurt bits, and shows the geometry of your toolpath faithfully. Perfect for first 3D carve dry-runs and for checking a complex job before the real blank. The chips are messy and static-clingy, so have a vacuum ready.
2. MDF: cheap, flat, consistent, with no grain surprises. Great for learning profiles, pockets and V-carves. Two caveats: it is abrasive (it dulls bits faster, so use the cheap ones) and the dust is the nastiest (respirator + collection, see the dust and safety entry).
3. Pine / SPF construction lumber: the first "real wood". It is cheap and forgiving of feed errors, but its soft and hard growth rings tear and fuzz, which teaches you grain behavior early (see the species entry). Do not judge your machine by pine's fuzz.
4. HDPE (including dollar-store cutting boards, a genuine community trick): it "cuts like butter", teaches plastic chip-load discipline, and makes useful jigs.

Then graduate to poplar (cheap hardwood) before touching walnut money.

The one rule even in practice stock

Keep the feed honest. Practicing at timid feeds teaches rubbing habits (burning, dull bits, see the burning entry). Practice material is for practicing CORRECT cutting, cheaply.

Pro tips

• Save every decent-sized practice offcut. They are future test pieces for new bits and settings.
• Run each new bit's first cut in practice stock to verify its tool-database numbers before it touches project wood.