You handle it like you handle every other financial decision.
You figure out what you need, you figure out what you want, you factor in an "unexpected expenses" amount, and you plan, budget, and spend according to your long term goals.
In our last home, we tackled projects slowly, one by one, over a few years. We did as much DIY as possible, and there were a few projects we never even got around to before selling. And I'm talking basic stuff, like replacing a worn laminate countertop, ripping out ancient stair carpet, etc. If it functioned at all, we left it until we had the cash to pay for it on top of our financial goals. We also took a few years to furnish the house nicely. We bought almost everything used, so it took time to find all of the right pieces for the place to come together.
The house being "pretty" just wasn't as important as our financial health.
Along the way, several home expenses popped up anyway: every appliance died, the electrical panel needed to be replaced, the AC died, some plumbing issues came up, etc, etc. That shit happens and those expenses took precedent, and often further delayed the "want" projects.
Then we reached a major financial milestone, moved into our new house about a year and a half ago, but this time we downsized to a much smaller, minimalist apartment , so none of our old furniture would work, we needed highly functional, modular furniture, so we bought everything new, but we had the cash for it, and the net savings of living somewhere small more than make up for it.
Since then, we've had to replace the ancient AC and some of the plumbing, which fell within the range of our "unexpected expenses" budget.
At no point did we ever "go broke" for our homes. It's just about priorities. The key is to understand that it's not a "need" to have your home and furnishings be pretty. An update doesn't "need" to be done because something is hideous. Furniture doesn't "need" to be bought just because a room is empty, and even if you do actually need furniture, it doesn't "need" to look good. People basically give away dated furniture, so if you really need a coffee table, you can get an ugly one for free or nearly free.
If you go into debt to make your place pretty, then that's because you've prioritized that your house being pretty is more important than your financial goals. And that's fine, you are allowed to make that your priority. Just be clear and honest with yourself about exactly what your priorities are, and then work towards them.