Ahhh....the classic question of someone looking to be more organized. I've been pondering this exact question lately as we are preparing to add Baby 2 to our family. I lie awake at night wondering if we can really fit 2 adults, 2 children under the age of 2, 2 dogs and a cat in our 1300 square foot house. The answer I keep coming back to is resoundingly "yes!" Sure, we need to do a bit of tweaking to our current storage habits but I think it is entirely possible.
Here is my space planning process...Ask yourself "when it's all clean, does it all fit?" For instance, when you do laundry and it is all complete, will it all fit in your current clothing storage arrangement? Or do you avoid doing all the laundry because you know it won't all fit? Same idea in your kitchen. If all your dishes were clean at one time, would you be able to put them all away in your current storage space? If it's toys (the bane of many a family's existence), are there places to "put away" all the toys? Apply this idea of "will it fit" to any space you are thinking of organizing.
Once you've determined IF you have enough space (which 99% of the time the answer is now), the next step is to decide what can be purged to make it fit. Sometime pairing down just 10% can give you the breathing room you need in a closet, dresser or cabinet. The goal should be to fit what you need and use in the space you have. This unfortunately may mean that the things you don't NEED or use regularly may have to go. But think of how nice it will be to have all your laundry put away when it's folded or your kitchen counters cleared when you go to bed at night. It's really refreshing to learn to live in the space that you have.
So I guess the answer to my initial question of "Do I need more space or less stuff?" is both...but I can create more space but eliminating unnecessary items I am storing. If you have tips on how your create more space in your home, feel free to comment below!