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Another way to save money would be skip buying Windows and use Linux, on a budget as low as yours it's worth it to put into hardware everything you can, get Linux free and skip Windows.
What's your total budget?
The Athlon 5350 honestly won't get you all that far for gaming. Maybe simple, undemanding games and older games. Not to say that nothing at all will play on it. League of legends should for example play well enough as long as the rest of the system is up to par. Just that a lot of things will not play on it. I mean like a lot of things will just not play at all. Specially on the integrated graphics but even with a R7 240 or whatever graphics card you might have thought to add. Frankly I don't think it would really take more than a R7 240 anyways.
I believe that the Athlon 5350 is meant for low budget HTPC and low-power low-budget PCs for internet and some limited home office tasks. It would also be wonderful in a Internet Cafe or something as even with a few 100 machines you would still get really low power bills. Maybe also for low-power off-grid living where you generate your own solar energy or something. I mean the really big features of this chip are cheap with basic integrated graphics and extremely low power draw.
I wouldn't honestly be comfortable selling it to you in a "gaming PC". You need to understand it's limitations, while you may find games that run you will find many more that will not. Also as time goes on the number of games not able to run will increase and the number able to run will likely not increase much at all. This will really limit your options for any sort of multiplayer.
If you want some free Linux games (not all), League of Legends, older versions of Counterstrike (not CS:GO) & Halflife 2 mods then this might be the chip you want. Just saying it will be very limited and not what most people would call a gaming machine. Upgrade potential will also be very limited, you almost might as well build a whole new system rather than upgrade. I think upgrades would be limited to R7 240 GPU if you don't already have it, up to 8GB of RAM and some extra HDDs.
Let me help you make a better gaming PC. A good start can be made often for as low as $300~ depending on current market prices. Might even be able to do better than the Athlon 5350 for less than $300~, just saying. I know you can make a tower for under $200 with it but for similar you can probably make another tower which even if it's not any better has at least better upgrade options.
Anyways here's the sort of thing I'd recommend for around $300~
AMD A8-7650K 3.3GHz Quad-Core Processor
Asus A88XM-A Micro ATX FM2+ Motherboard
G.Skill Ripjaws X Series 8GB (2 x 4GB) DDR3-2400 Memory
Seagate Barracuda 1TB 3.5" 7200RPM Internal Hard Drive
Apex DM-317-A MicroATX Slim Case w/275W Power Supply
http://pcpartpicker.com/p/nZGXBm
Base Total: $310.42
Mail-in Rebates: -$15.00
Total: $295.42
That's in a Micro-ATX slim case. Now personally if this is your only or best PC then I strongly recommend going for either a regular (non-slim) or even full-size ATX case as this will give you many more future upgrade options without having to buy a new case later. The slim case is nice and small like you seem to want but it is also very limiting to what upgrades can be added. It's also $10~ more expensive than the cheapest ATX sized case and power supply combo.
Anyways mini-ITX stuff often costs more even though it's smaller and more efficient. That's part of the reason I used Micro-ATX instead in this build. It's still pretty small though.
http://pcpartpicker.com/p/DHK8kL
Still use heatsink on CPU but other things get cooked and CPU's don't fail too much today - it's generally motherboard issues where components that are power hungry or don't really configure properly that make us cry - why?
With i5 you want the best for longevity maybe 4590 3.3 or newer. Plus memory either split 2x4 or 1x8 and get another later.
Don't waste space over cost. It will cost you more later on and you should start saving yesterday for tomorrows upgrades. There is never a best sale time for buying hardware its just relevant when you need it for something that requires its use and if you are not prepared for the cost you can't even think about these considerations yet.
What's your budget?
What exact (models) of parts do you have now?
My goal is to save space and energy but still have decent performance.
Ok so with a GT 640 and at least 4GB of DDR3 RAM for the system the Athlon 5350 would probably run some games. Most things from last generation. Some newer cross-generation games at lower settings and resolutions. Some MMOs like Guild Wars 2, DoTA2, League of Legends and so on. There still would be a lot of stuff that would not run though. Bottom line it's not as good as the CPU in the newest PS4 or XB1 consoles. The GT 640 isn't as good either.
The Athlon 5350 is certainly more power efficient than your C2D E8400 but the performance probably isn't all that much better. Passmark shows it maybe has a 30% advantage at best. Yes it has newer technologies, yes it has 4 cores and may be slightly better for multitasking but it's not a performance gaming part.
Ok that's a worthy goal. If budget isn't so important then I suggest going for a A8-7600 or A10-7800 APU. These both have "configurable TDP" which is a option that you can set to get them to use not more than 45W. Regularly they are 65W parts but a software switch (in BIOS I think) can be flicked to tone them down even further to only 45W. Also remember that they will not always draw full power, only when they are actually being fully used will they draw full power. When they are only in partial use they will draw less power. So at the 45W setting they are likely about as efficient as the Athlon 5350 APU. They are just more expensive.
The performance benefits of these parts above the Athlon 5350 are reasonably large. Also they are at the critical point of being "as-good-or-better-than" the CPUs in the newest consoles (though not the GPU part) which will be important for gaming now and into the future. To meet or beat the consoles you'd additionally need 8GB RAM and a R7 260X or higher GPU plus the PSU to run it. That could come later though as another set of upgrades and who knows, maybe by then they've made a GTX 950 ti or something, super power efficient like the GTX 750 ti.
Anyways the A8-7600 and A10-7800 both have a much higher clockspeed than the Athlon 5350 as well as Turbo which raises the clockspeed even higher. They also have double the cache at 4MB up from 2MB in the Athlon 5350. The A10-7800 at it's 65W setting and including Turbo should be near twice as fast as the Athlon 5350. As such it doesn't look like power efficiency is very much worse at all.
Here's what I'd recommend if you can afford either one:
A10-7800 shopping list:
AMD A10-7800 3.5GHz Quad-Core Processor
ASRock FM2A78M-ITX+ Mini ITX FM2+ Motherboard
G.Skill Ripjaws X Series 8GB (2 x 4GB) DDR3-2400 Memory
http://pcpartpicker.com/p/rtfRRB
Base Total: $279.96
Mail-in Rebates: -$30.00
Shipping: $2.99
Total: $252.95
A8-7600 shopping list:
AMD A8-7600 3.3GHz Quad-Core Processor
ASRock FM2A78M-ITX+ Mini ITX FM2+ Motherboard
G.Skill Ripjaws X Series 8GB (2 x 4GB) DDR3-2400 Memory
http://pcpartpicker.com/p/ry9tsY
Base Total: $235.96
Mail-in Rebates: -$30.00
Shipping: $2.99
Total: $208.95
Anyways that's my recommendation. You also might find that the integrated graphics in the A10-7800 rival your GT 640 to the point that you might consider selling it and saving for a new card with over 1800 GFLOPS when one that suits your budget and power needs is released. The integrated graphics in the A8-7600 meanwhile are not as good but still similar to a R7 240 dedicated card.
One further option if you are into doing a bit of manual tuning to achieve low power results or just don't care that much is this:
AMD Athlon X4 860K 3.7GHz Quad-Core Processor
ASRock FM2A78M-ITX+ Mini ITX FM2+ Motherboard
G.Skill Ripjaws X Series 8GB (2 x 4GB) DDR3-2400 Memory
http://pcpartpicker.com/p/ZhpF3C
Base Total: $221.86
Mail-in Rebates: -$30.00
Shipping: $2.99
Total: $194.85
That's the same CPU as in the A10 or A8 except integrated graphics have been disabled, the factory set clockspeed is higher and the CPU is multiplier unlocked for overclocking and overvolting (or underclocking and undervolting). So if you wanted to get that and then manually tune it to be power efficient you might even be able to get it to run at a lower wattage than 45W like on the A8 or A10. After all without the integrated graphics to draw power maybe you can get it to run at 35W or something crazy. If you are really into it and testing how low you can undervolt and underclock while keeping it stable with reasonable performance above 3 GHz on all 4 cores then you might get the best results here for the lowest price. You will be missing out on the integrated graphics and HSA of the APUs but you have a graphics card already anyways.
their igpus are ok, but cpus fall under i3 performance for games
go with an i3 or pentium g if on a budget, or i5/i7 for gaming rig