4. What modifications should I do?Once you've decided what car you want to use, you can start thinking of modifications. If this is your first time taking part in a motorsports event, do as little modifications as you can rationalize. I would suggest at most brake pads and tires. Make sure the fluids in your car are up to par, especially the brake fluid. After that, everything else is just extra stuff to go wrong or for you to tune (like sway bar thickness, ride height, spring rate, etc).
What kind of motorsports you want to do will play a role. This is especially true of autocross, there's no point in doing mods that throw you into a class that you don't stand a chance in if you want to be competitive.
Well lets say you're tired of just having nicer brakes and tires and want more. How you answered number 3 will ultimately dictate what you can change and to what extent. If you're daily driving the car, you likely don't want a roll cage, fixed back seats, harnesses, etc. While those things add at least 10 street-cred points, they suck around town. Trust me, I know. A fixed back seat gets uncomfortable and hot (since they're usually made of a solid piece of CF or plastic), harnesses dig into your flesh and make shoulder checking and other activities difficult and a roll bar/cage adds noise and obstructs your view. You also likely won't want motorsports ready suspension because that means rock hard springs and struts, large sway bars that can cause clearance issues and stiff bushings. Racing quality brakes are loud, touchy and prone to not working when cold. In short, the parts that make a race car go fast make a street car dangerous and unpleasant to drive. If you want to drive this car around town with the wife and kids, and don't want to end up divorced and alone, use a bit of common sense when modifying and always ask yourself which is more important, going fast or driving to and from work with your back in one piece?
If you have a second car, you have a lot of options. If you're doing high speed events, a roll bar/cage, harness and a good quality bucket seat makes sense. This is why I'm a big fan of having a second car, it gives you the freedom to do modifications that would be silly on a daily driver (like those mentioned above).
Regardless of which path you choose, I'd recommend the following priorities.
1. Make the car safer for you to drive.There's no point in having 700 WHP on tap if the car is going to impale you with the steering column or crush you in the event of a crash. Your safety should always be the most important factor when you decide what modifications you want to do. You don't need to go crazy here, buy the best you can rationalize, not necessarily the best you can afford. If you're just doing an autocross here and there, getting full cage, fire suppression system and a three layer Nomex race suit is overkill.
This article gives a nice explanation why spending money on safety is so important. It's better to have the parts and not need them than need the parts and not have them. Not every car needs a fancy fire suppression system but always make sure that the safety equipment is on par with the go fast bits.
http://grassrootsmotorsports.com/articles/fighting-fire/2. Make the car more reliable. While it's impossible to beat OEM reliability under OEM-designed conditions, it's possible to make changes to a car that will make it more reliable than stock when you're flogging on it at the track. This includes things like an oil cooler, transmission cooler, brake ducts, temperature and pressure sensors, etc. Basically you want to keep the car from dying or at the very least know before hand to give the car a break so it won't die. Huge power is great but if you spend most of your time in the shop or in the pits, you'll never get a chance to enjoy it. Don't forget parts that make you as a driver more reliable like cooling vents, pedals that facilitate heel-toe, shifter modifications, etc.
3. Make the car fun to drive. Slapping on a giant turbo when you have stock brakes and suspension isn't a good recipe for fun at the track, it's a good way to end up ruining a nice pair of pants. Unless you're out there to make money (in which case you're driving whatever car is fastest in that particular class or the car your sponsors provided you), having fun should be high on the list of priorities. Getting out of a car white-knuckled is not fun, battling crazy oversteer/understeer behaviour is not fun. Ideally you want to learn something new every time you go out. This won't be easy if it feels like your car is trying to kill you.
4. Make the car faster. This should be your last priority. Everyone at some point gets the notion that they need to be fast to take part in autocross or solo1 or rallycross. This can't be further from the truth. Sure it's nice to see your name at the top of the times list but if you've done this with your wallet, you really have no reason to boast. Become a fast driver first, then get a fast car to match.
Before you spend any money on a modification, do some research on the various forums out there applicable to your car. If you're racing a Subaru, WSC, NASIOC, IWSTI, etc. are the places to check. What you want to find out is whether your modification is a good idea, how common it is, what the best model/manufacturer is, etc. If an intake is only going to gain you 1 HP, your money is better spent elsewhere. If those dope JDM coilovers you've had your eye on have spring rates and damper behaviour that make them unpredictable and shaky on rough roads, they're probably not a good idea for Race City.
Spend the time to do the research so you only have to buy something once.Related to modifications is where to buy them and who should install them. If you've done your research, you should know where to buy them so I'll focus on the second part. Ideally you want to do as much work yourself as possible. The reason for this is two fold. Firstly, it will give you an opportunity to learn about your own car and secondly, you will likely be more anal about torque specs and all that than some mechanic with a full day of work. This can be a scary prospect and if you're anything like me, your mind will be filled with all the things that could go wrong. When I first starting doing brakes, I was paranoid that I'd forget to tighten something down and my brakes would fall apart or my wheels would fly off. This will go away the more you work on your car. For a daily driver that's still under warranty, I wouldn't be as worried about doing all the work yourself. If it's a dedicated track car, you should do as much as you can with the tools you have available to you. It can be fun too, currently I'm designing an oil cooling system which means scanning the net for the various hoses, fittings and other parts I'll need.
Budget
It doesn't matter how much money you make, a budget of some description is a good idea. It doesn't have to be set in stone but it can help prevent frivolous spending. The budget should also be prioritized and should sync up with the above list. Safety should always be first or, ideally, independent of other costs. Try to be as realistic as possible. A 1000$ JDM intake is unlikely to vastly outperform a 300$ USDM intake.
Hopefully someone finds this helpful. Feel free to add your own thoughts on the subject.