I would add the following:
1) Buy the best monitor possible (within reason). The next computer upgrade will be able to use the same monitor. If you skimp on computer #1, when you replace it, you might decide to incur an additional cost to upgrade monitor.
Computer #1 for me was put together in 1996. I spent ~$5k on PC+monitor. Computer #2 for me was 2002, and we saved around $500 because we did not need to buy Monitor HP showed with computer.
The monitor is still going strong and when the next upgrade occurs, I plan to use same monitor as I have now.
2) Computer hackers love old PCs. Sell old computers to co-workers, HS students, grandparents whoever needs a PC for parts or basic functions.
Grandma isn't going to be using high tech flight simulators or creating sophisticated spreadsheets. She'll surf the web and check e-mail for pictures. Your old PC might make a good gift or be sold for scrap parts.
3) Pirating software is illegal, and as an employee of a software company, I cannot advocate anything illegal.
That being said, there is freeware out there. I play games online for free (freearcade.com), I download trial versions of software (snagit) and use free e-mail (yahoo and hotmail).