Dedicate a room in your home to music production and soundproof it. How much you spend is up to you. Soundproofing can range from stapling egg cartons to the walls to hiring a contractor to install new windows and doors and add insulation with special acoustic panels.
Buy a new computer with a high-end sound card, CD burner, good-quality speakers and an external hard drive. Your music files will be very large, and will fill up the hard drive that comes with your computer, causing potential problems when using your computer.
Research software for the kind of music you want to record. You may find that the right software comes bundled with your computer. Take care to get software that will do everything you need without taking too long to learn to use. If you don't want to spend a lot of time learning to use software, you may have to forgo some options.
Acquire a good set of headphones and a high-quality monitoring system so you can make adjustments to your music and hear the results exactly as they would sound to the listener. If you're going to record more than one instrument at a time, add a mixer.
Get microphones for your musical instruments. Each instrument, including the human voice, has its own requirements for a microphone, so get one for each instrument you will record.
Consider adding a digital audio input/output device, a digital analog workstation, an analog-to-digital-to-analog converter and a modular digital multitrack recorder. All these will help improve the sound quality of your music, but they may not be necessary depending on what you're doing and how much you can afford to spend.