Consider a minimalist approach with multifunctional furniture. Opt for a neutral color palette to create an open feel, and use mirrors to enhance the sense of space. Incorporate smart storage solutions like wall-mounted shelves and hidden compartments. Choose furniture that serves dual purposes, such as a coffee table with built-in storage or a sofa that can also be a guest bed. Use strategic lighting to highlight key areas and create ambiance. Finally, add pops of color and personal touches through cushions, artwork, or plants to infuse warmth into the compact living space.