Record a CD. The bottom line is, if somebody hears you play live and likes it, they're going to want to hear your stuff again. And if you have more than a handful of songs put together, by all means, get them laid down. Try to find a reasonably priced recording studio. Use all of your connections, anyone you know who has access to equipment. Offer trade if you have anything they want. You want to spend as little as you can to have it sound the way you want, so you can recoup expenses quickly.
T-shirts are the bread and butter of the touring band, so you'd better make sure your design is up to snuff. If you know people in the arts community, find someone who will make you a cool design for nothing or next to nothing. You could also hire a college design student to design your shirt for next to nothing. Someone walking around wearing an awesome t-shirt with your band's name on it--that's how legends begin.
The same principles apply here as with the T-shirt. Don't be lazy on the poster design. Don't just do something you think is cute or funny. Find an image that really fits the aesthetic of your band, something people will inevitably associate with your music for years to come. Other items that follow similar concepts: pins, stickers, hats and hoodies. Create a logo and put it on all your merchandise.