How much RAM and CPU do I actually need?

The general rule

Size for your real load, not for the worst case you can imagine. Upgrading is always possible; money already spent is not.

Personal site or blog

One core and 1 GB of RAM. The Economy plan exists precisely for this.

WordPress with moderate traffic

2 cores and 2 GB. If you run a lot of plugins, budget for 4 GB.

A PostgreSQL or MySQL database

RAM is the deciding factor. For a dataset that is actively read, give the machine at least as much RAM as the working set.

Control panels

cPanel and DirectAdmin consume roughly 1 GB on their own. Add that on top of what the site itself needs.

How do I know I am short?

free -h
uptime

If load average sits consistently above your core count, it is time for more CPU. If swap is in constant use, you are short on RAM.