what should i upgrade first?

How did those 2 got together? I'd go with a newer CPU if i were you.

The GPU, your CPU will bottleneck it, but you will still get much better performance than by changing the CPU first, and then change the CPU. Also be sure to have 4Gb of RAM minimum, or more if you like.

Memory, always memory. Fast memory on fast bus.

PS: you have provided no information about your pc, upgrading cpu or videocard could be meaningless...

CPU, otherwise it'll bottleneck the shit out of your GPU when you buy one.Also GPU's will probably need a new PSU too so upgrade CPU first.

Haven't run into a game yet (@1920x1200) where a super low budget GPU (HD5850) was a problem. My CPU (Q6600) however is a huge problem in many games (take for e.g. StarCraft II and other games where there are a lot of units to compute). The situation seems quite comparable to yours.

Checked a bit the net and a GT 520 seems to be more supbar than I thought? Is this a single slot card? Has it even a fan? You probably do need a GPU and a CPU.

Best to save for a decent core i5/i7, then get a current GPU around $150. Will do you good in gaming for the next 10 years at the very least and only need a upgrade to a more modern and therefore cheap midrange GPU every fee years.

BTW, you can always search for different systems with the same CPU or GPU. And compare performance. e.g. 3dmark.com

Your cpu isn't that bad so you should upgrade your gpu.