I think before you start spending tons of money on HP-increasing mods, you need to lay the foundations first so that when you do start adding more HP, you can make full use of it. Therefore I suggest that to begin with, do the following:
1. Weight reduction: You'll find the best weight reduction thread at
SN95 Mustang Weight Reduction List - American Muscle Registry . If you don't need the AC you can remove the compressor, lines, and condenser to save even more weight. Aluminium heads will also save 40+lb so think about those before throwing money into ported iron heads.
2. Chassis & suspension: Subframe connectors, rear upper/lower control arms, remove front antisway bar (strip only), adjustable shocks/struts.
3. Stickier tires.
4. Gear swap. If you're planning to build up the engine with heads/cam/intake and spray, stick to a 3.55:1 or lower ratio. Use a 3.73 or 4.10 only if the engine's going to stay N/A and without spray.
5. Upgrade fuel pump. You're going to need that fairly early on in the mod process so go straight for a 255lph pump. It'll allow plenty of room to grow.
6. Upgrade brakes. The '94-'98 Cobra front brake kit with 13" rotors and PBR dual piston calipers is a straight bolt-in swap and fairly inexpensive. I did it and it made a night-and-day difference over the stock GT front brakes.
7. Short throw shifter. A lot of people swear by the MGW short throw shifter so give it a look.
While you're saving up to buy performance-enhancing parts, there's some
freebie mods you can do to get you going.