If the OP wants to use Mavericks or Yosemite, he will have to get an ssd.Considering you can do this for free, why not. The lag you describe is not normal. Hardware doesn't slow down over time; software does.
Actually, before a reinstall the first thing I would try is deleting your Safari cache. You probably have years of cookies, history, and temp files. Go to your desktop, hold down the option key, go up to the "Go" menu and open Library. (note Library only appears when you hold the option key.) In there go to Caches -> com.apple.Safari. Delete Cache.db, fsCachedData folder and Webpage Previews folder. On one of my older machine the Website Previews folder had thousands of files; just deleting that fixed Safari from being nearly unusable. Beyond that you can also try resetting Safari.
An SSD will certainly improve your machine, but there is no reason it can't perform as new as it sits now with a clean install (unless the hard drive is actually dying.)
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No complicated decisions needed here.Says the guy with 16gb ram and a tb of storage.
However you pose a good point.
I'm just debating since I have the option to get something right now; I mean I'm sure it will be worth it in the long run no? Other than the memory, there is nothing wrong with this baby and I hope to use her for many years to come! (I have taken well care of her)
^Or should I just keep my 70gb of music, get rid of all other junk (maybe put it onto an external) and just reinstall OS?
Otherwise I was thinking about spending this money on my car maybe, upgrade speakers or deck or something? Hmm this is hard!
I would not spend large sums on upgrading your macbook. A RAM upgrade is unnecessary.
Simply get an ssd that is large enough and manage your storage better.
Then reinstall the OS and your macbook will work like a charm.