Changing your garage into a living space, such as a living room or family room may add resale value to your house and may just keep you from having to see your house and buy a bigger one. In order for you to do this, the garage will need to be attached to the house. There are a lot of people who have done this and improved the value of their property, but it could also bring down the resale value because people who are buying houses tend to want garages.
Check with your community or HOA guidelines to see if it you are allowed to do a renovation of this type. Also, you will need to check on local zoning rules and state building codes. Check with your local building codes department to see what permits you will need for the job.
Rent a dumpster. Remove garage door and tracking at this time. While you have the dumpster, frame out any new windows, doors and partition walls, especially where the garage door used to be. Hang and set all windows and doors checking to make sure they are level and plumb. Check the windows to make sure they work correctly and seal well when closed. The door(s) should swing open and close easily and the gap around the door and frame should be the same all the way around. I would strongly recommend having a professional hang your windows and door(s). It will save you a lot of time and headache.
Insulate around the windows and doors and make sure that any new exterior walls have proper insulation. Making sure that the moisture barrier is facing inward. For this project, you will need the insulation (R-19 and/or R-30), a tape measure, utility knife, straight edge, insulation knife, stapler, work gloves, a long-sleeved loosefitting shirt, goggles or protective glasses and a dust mask.
Hire an electrician to install the new breaker switches in your panel box. Also, have him install any wiring you will need. This may be the most expensive part of the job, but it will be the safest way to do it. Install a new window unit for heating and cooling your new room. Check to see if any plumbing is needed for your new renovation. If so, then this is the time to install it.
Apply new drywall. Place screws into studs every six inches to secure tightly. Counter-sink the screws using a counter-sinker attached to the end of your drill. Mix the mud and use a trowel to spread it onto the drywall. Be sure to get the mud into the seams between the sections of drywall. Place drywall tape onto the mud and with your knife (or trowel) push as much mud out from under the tape as you can. Leave to dry overnight. Repeat as needed and paint when finished. Once the paint is dry this is the time to install new flooring if you need it.
Trim around the interior edges of your doors and windows. The tools needed for hanging the trim around the interior edges are finishing hammer, hand plane, measuring tape, carpenter's glue, sanding block and 120-grit sandpaper, jigsaw, combination square, compass, pencil, utility knife and chisel, putty knife, nail set, mitre saw equipped with crosscut or combination blade, drill with 1/16th inch diameter bit, pneumatic nailer, random-orbit sander, router, and table saw. Also do the base and crown moulding now as well. Tools and material needed for installing baseboards are coping saw, finish nails, sandpaper, paintable caulking (if painting), wood putty (if opting for the wood's natural colour), and wood files (half round and rat tail). Crown moulding tools and materials needed are power mitre, drill, tape measure, pneumatic finishing nailer with 1 to 2 inch finishing nails, framing square, chalk line for helping to keep crown moulding level, coping saw, utility knife, wood rasp, electronic stud finder, hammer. Once moulding is in place, bring in the furniture and window treatments.
You could get a team of friends together to help you, especially if you have an electrician or experienced handyman in the group.
If you are unsure of what you are doing, the prudent thing to do may be to hire a contractor to take care of everything, but that tends to be costly.