You need to remove all the furniture except the tv table for now and the brown couch. Remove the carpet it is not healthy. If the wall paper is vinyl remove it and cover over with a thin sheet of wallboard/sheetrock\drywall what ever you call it or mud it to give it a southwest look stucco. Remove the paneling . Paint before laying flooring. Get a vinyl flooring that looks like wood light but not too light. Put tv away from window not a good place for a tv. make that the area for two chairs with table between with light. Go to Salvation army or garage sales and look for new furnishings they usually have great deals so does Big Lots. put speakers on tables in corner with wires along the floor and wall so it is not hanging from the ceiling. tacky. Get color in there like Blues or greens even reds or orange to accent the brown couch, get a few chairs that have a pattern or a slip cover for the couch with a pattern, contemp. accent with pillows and curtains. $500 budget?