Priced out a gaming system for a friend about 2 weeks ago, came to right at $350 total after rebates, not including the monitor, which most people already have. That bought him an e2160, an 8600GT, 2GB of RAM, and a 320GB HDD in a nice Coolermaster CM 690 case . He's thrilled, it runs everything he throws at it, including Crysis at 1280x1024 with a mix of medium/high settings.
We sold his old system on Craigslist for $200, so in the end, the upgrade cost him around $150.
One of the best things you can do as a PC gamer is to not sit on hardware until it's too old to be worthwhile to others. I've moved from a 6800GT to a 7800GT to an 8800GTS g80 320MB to my current 8800GT, and I haven't spent more than $40 either time to move to the newer card. Also sold my Opty 165 w/ mobo and 2GB of RAM and only paid like $20 more to move to a nice P35 board w/ an e4500 and another 2GB of RAM, then about a month ago, I sold my e4500 for $120 and picked up an e8400 for $190.
It's work and money to be a PC gamer, but it doesn't have to be this huge money sink that people tend to make it. In the last 3-4 years, I've spent less running the occasional piecemeal upgrades than a PS3 would cost me, and probably a 360 bundled with a 120GB HDD. Yes, if you do it all at once, it's going to hurt your wallet, but that's why you don't do it that way.
Also, if you have a Microcenter anywhere by you, their Microcenter card is invaluable for upgrading. You can buy new stuff, sell the old, and put that money towards your card bill, and it's always 6 months same as cash on their card, so no annual fees or interest if you pay the stuff you buy off within 6 months. Also a great way to buy items that come with a hefty mail in rebate, since you'll usually get that rebate in time to pay the bill off, and in the 2 cases that I didn't receive my rebate within 4 months, I took copies of everything back to the store and they cashed out my rebate right there at the customer service desk.
Anyway, hope these few tips work for people, I've been using them for years and I rarely go wrong with piecemeal upgrading, and I rarely have to hear my wife complain because I spend too much on upgrading anymore
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