It's generally much better to determine the total budget before anything else.
Once you have a set budget (which should be set in stone as it's very easy to go over), then it becomes much easier to start sourcing parts, looking for best prices, combo deals, rebates (which shouldn't be factored in as being under budget since you initially have to pay the non-rebated price) and determining which components should be given priority (faster RAM, faster CPU, faster VGA card, better featured MoBo, nicer case, etc) and finally, what type of performance you can realistically expect to see.
Throw out a number and people will give you suggestions on where to start.
IMO, the real price/performance gains aren't realized on custom configured systems until you start spending a bit more than your typical low budget configurations. What often happens is the builder starts cutting corners with cheaper components to stay under budget, which can result in a less reliable rig (costing the user more in the long run in the event of early component failure).
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