Lay down your flooring in the room. Use interior-grade flooring such as wood, laminate, carpet or vinyl. Choose a flooring material that suits your needs. If the house is older and doesn't have a moisture barrier under it, lay down polyethylene before installing the new flooring. This protects your flooring from any water seepage.
Paint the walls and ceiling with a basement, waterproof paint. This paint is designed to protect the surfaces from additional moisture in the room. It is durable and easy to wash. Apply it directly over drywall using a sponge roller and paintbrush. If your walls are masonry, use a basement paint designed for this substrate. Allow the paint to cure for four hours and apply a second coat. Use bright colors in the basement to give an illusion of light and space.
Install your lighting in the ceiling. Choose light fixtures that are close the ceiling because basement rooms usually have lower ceilings. Bright lights are also preferable because basement windows are smaller and don't let in a lot of natural light.
Finish the room by installing baseboard trim. Choose wide trim to protect the lower wall and give a strong line around the edge of the room. Wide trim is particularly useful in smaller rooms where it is easier to knock items against the wall. The trim takes the hit rather than the drywall. Use construction adhesive to install the trim in place.