We live in an 800sq ft, 2 bedroom. We are me, DH (military, so tons of stuff that goes along with that), 2.5 year old DD, and one dog.
I HUNT down extra stuff to purge. I think of new ways to use space, without feeling cramped. I condense as much as possible. Examples: I got rid of all our DVD cases, and just put the DVDs in one of those notebook-like DVD holders. That saved a ton of space, and nothing was lost (unless you have some odd attachment to your cases). I put all our book cases (well, except one in our bedroom) on the far dining room wall. It looks so much neater. All of our clothing is in one closet + one dresser, with vertical organizers and dressers in the closet. We pulled our bed out about a foot, and store DD's crib/toddler bed disassembled behind there, along with extra pillows, blankets, Halloween costumes, etc., and no one knows it's there unless you physically walk over and look behind the headboard. We cosleep (for now), so the second bedroom is a playroom and storage, and, since our kitchen is TINY, I use the second bedroom closet as our pantry (I stockpile food/supplies, and can/dry foods, so, we have a lot that needs to go somewhere, esp. in the fall/winter). Traditional? No, but it works.
I instituted a one-in, one-out rule. If DD receives a new toy, I get rid of an old one (when she's older, she'll get to help choose). If I buy new socks, I make sure to get rid of two hopelessly mismatched socks.
TBH, I need to do a good purge soon. DD has outgrown a lot of gear (baby carrier, strollers, etc), and with Christmas coming, older toys will need to go as well (someone on freecycle will be happy). Regular purges/recycling, and trying to think of new ways to make the space more efficient are key.