Shrinking is definitely more involved than growing a volume. If you haven't made any major changes or things you can't reproduce, the easier path is probably upgrading to a larger plan, making a new smaller volume with a new instance, copying over the changes, destroying the old instance and volume, and downgrading your plan. Otherwise, shrinking in place gets tricky because most utilities that do this want it unmounted, and as the primary partition for your OS it is hard not to mount it and still use the utilities on it.
As for backups, there is DreamObjects (cloud object storage) which is great for holding such data. The pricing starts at $0.025/GB/month for storage, and you can copy data to it via the command line with tools like s3cmd, boto-rsync and others.
If you do want to go the shrinking route, I can check with others in our cloud dept if they have some other idea. And if you have any other questions about DreamObjects, let me know!