Older PCs can still be very functional, but if you want to keep up with the latest software that's out there, then you should expect to upgrade your PC next year. Why? Major applications will demand more RAM and processing power to run effectively. Let's take Microsoft Office as one example. If you ran Office XP or 2003, then you probably noticed a huge difference in performance if you upgraded to Office 2007. Unless you have at least 1 GB or RAM, you can expect Outlook 2007 to be significantly slower compared to Outlook 2003.
Microsoft is getting ready to release Office 2010 and you'll need a modern PC if you want to run these applications efficiently. So, instead of paying for a Windows 7 upgrade if you currently use XP, consider replacing your older PC with a new system that comes with Windows 7.