How to finish a basement on a budget?





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It would be lovely if you could paint the ceiling. And hang some string lights. Doesn’t have to be perfect. Any leftover paint in your basement?
You can hide the storage/work space. Four eye hooks screwed into ceiling beams. Get some bright inexpensive shower curtains (solid colors) and hang them using wire between the eye hooks. They’ll brighten the place but the storage will be easily accessible.
Rustoleum, and everyone else, makes great colored Chalkboard paint for very reasonable prices. Paint a section of the wall with a fun color for her art studio. Let her hang her artwork, using Painters Tape to “frame” and attach to the wall.
Go to all your local carpet stores and ask if they have carpet samples they will give you. Also, pretty soon everyone is going to have sales on outdoor rugs. They’re generally colorful and fun. Keep your eye out for Clearance area rugs or the carpeting that’s sold on a roll at HD and Lowe’s.
Yardsale shop for clean comfy chairs and big pillows.
If you have a stray bench or table, give her a couple of plants to care for. There seems to be enough light.
Involve your grandughter. That, especially, will make it her space.
Referring to Nancy's comment: You can make, in other words, decorate or designate, your basement into any living area that you want. However, if there ever were a fire, and someone who is down there could not get out of the windows, then your fire insurance policy coverage could be nulled.
The other aspect that matters is if you have any area closed off with walls and doors and are designating it a bedroom and it does not have legal sized access windows, you can not legally call it a bedroom when listing the house for sale. Nor can you legally rent it out as 'living space' or 'bedroom'.