"I think the Baofeng is a good choice - I have two of them, one in the car and one for taking it with me. I would suggest that you buy the programming cable with it, you can then use a freeware software called "chirp" to easily program it (stand-alone programming is really a pain with this device). Also, if you want to use it in the car, a mobile magnetic-mount antenna will dramatically increase your reach (note that you may need an adapter to connect it to the Baofeng). You can also use an antenna like this and plop it on your refrigerator, a metal surface outside or inside etc. for home use.
As LQB said, it would be a good idea to get in touch with your local ham club - they can help you out. Oftentimes, they will even rent you equipment for free or even donate you stuff to help a newcomer and as a "service to amateur radio". In these cases however I think it's a good idea to keep energy balance in mind and try to give something back, for example in the form of commitment to the club, taking part in regular nets etc.
On another note, depending on your technical understanding, time etc., you may want to think about taking the "bigger" exam directly, if that's possible. Personally, I found it easier to do it "at once" than to take consecutive exams, and it can also be cheaper. Good luck!"
Great advice luc, thanks. I may get this budget handheld ham radio, programming cable and antenna as my birthday present :) At least I have a basic platform to start from then. I will contact my local HAM radio group though, and do the exam. Actually on the farm where I live, there is a very tall antenna, as the farmers son was a CB hobbyist - most farmers used it in those days before mobile phones. So I guess I could find out how to connect to that too. I think it is exciting to learn a new useful, potentially very beneficial, skill. :)