Hey, Ebenezer.
The question is as broad as, "What is the meaning of life? Tell me what I need to live!"
I spent the last couple of years hanging out at forums like this one and a plan for a newbie home studio has emerged.
It starts out with the inexpensive but quality stuff I have now (
a Tascam US122, Cubasis, a Rode NT3, still looking for monitors). That is enough equipment to keep me busy for a long time, and it's stuff that will be useful no matter how far this goes. If after a couple of years I'm still doing this, and am really getting limited by my equipment (right now I'm experience, skill, and talent limited), I'll move to phase 2.
In this phase, I'd graduate to a dedicated room in the house, dedicated PC, and a multi-channel front end like the Aardvark Q10 or RME Multiface. That will require much more equipment like mics, mic pres, etc., and a move to higher level software like Sonar or Cubase. This move will probably cost about $5000 in equipment.
If things keep expanding beyond that, and I find myself equipment limited again, I would think that this would be a hobby that would start paying for itself as a small business. Then it would move into a dedicated building, and step up to even more inputs, higher end electronics and mics.
The first level can be done for <$1000 (if you can find a monitor system your happy with in that budget.) The second level can get up to $10k pretty easy. The third can cost $100k. Or, to make it sound less painful, 60dB$, 80dB$, and 100dB$.
People say that you will get hooked. They say that because they did and most do. If you'll carefully develop a long term plan, you'll be able to get started, see if you like it, and grow from level to level. I spent a long time being frustrated because I thought I'd have to spend $5000 to get started, and that just wasn't going to happen. Now I'm happy, my bank accout's happy, I'm having fun, and I have future if I want it.