Rad, have fun with your project! I’ve made my recommendations in order of priority (in my opinion) if you want to take them on as you save up money rather than all at once.

First and most important: Tusq nut, locking tuners (I’ve had good luck with guitar fetish and musiclily stuff if you’re trying to stay on a budget). The biggest problem with budget guitars is tuning stability, and the culprit is ALWAYS the nut. Locking tuners are a nice to have as well

Second I’d recommend some AlNiCo-v pickups since the squire probably comes with cheap ceramics. Again, if you’re trying to stay on a budget you can get some decent cheap upgrades from FLEOR. I’d recommend something a bit more tame to pair with the duncan distortion if you’re trying to increase versatility, and choose a 4-conductor version so you can…….

Third: switching. Find some push pull pots so you can split your bridge and neck pickups. If you’re trying to keep it darker sounding go with 250k, if you want to brighten up go with 500k.

After that you can look at body shielding, upgraded bridge… but these are really diminishing returns. Also you have to be careful when looking at bridges cuz the screw spacing is different between USA and import models much of the time. The body thickness is also generally thinner on imports too so if you’re doing a trem upgrade you’ll wanna make sure it’s not too thick for the body. I learned about both the hard way but thankfully gave access to good machinists.