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Keep upgrading.
As you level up, you will throwing out old item. However, max out item help you climb level and questing faster.
Don't worry about resources. You will have a ton of gold "trash" later on. Each time you kill boss, participate in world map event, it throw one or two gold item. Most of gold item are weaker than what you have. So, break them for materials.
Personally, i usually play ARPG's on hardcore and upgrading items seem to be helping my current HC playthrough. As much as i want "endgame", the idea here is to survive. Funny enough, my current HC (lvl 32) has outlived and further along the campaign than my main SC character. I dont have much time to play, these days, sadly.
Starting at about level 20, I always upgrade my weapons up to the third level (the first three upgrade levels only require common components). The fourth level requires more rare components which I want to preserve for the endgame.