More and more we are producing commercial tracks in our bedrooms.
Most of us have a computer and more than likely some basic recording software. When it comes to taking the next step in improving your recording setup you should consider these guidelines:
1. Start with software:
Logic Pro (my choice), Cubase, Protools are great programs that will allow very advanced music production with out putting you into major debt. They also come with a vast variety of software synths and sounds, built-in drum machines and loop libraries.
2. Invest in the front end:
Spend your first money on a good mic preamp, a microphone and then AD converters, before investing in major outboard gear, speakers or plug-ins. You can always go to a commercial studio to have your production mixed, but you can’t fix what you did not capture in the recording.

I recommend Neumann and AKG Mics. For Pre-amps see if you can get a hold of an Avalon 737, Millennia STT-1, a original Neve, or one of their modern reissues.
A decent mic pre with compressor is going to put you back roughly $2000 or more. If that is out of your budget right now it is worth saving for it.
As to the AD converters, I swear by Apogee. I really heard a difference when I bought my first Rosetta 200.

3. If you need to record more than 1 or 2 channels at a time
As you can see the front end can be quite expensive. If you want to track your whole band playing together at the same time consider renting a studio. Then bring the tracks home for further overdubbing and editing.

4. Ask yourself if you are really into the recording process.
Not everyone has the mindset to be a producer and engineer. It might be better to build an alliance or hire someone who is.
This is an important point. I know a lot of songwriter/artist who got very frustrated because they just don’t have the technical mind set for being an engineer. It kills their creativity having to think about busses, routing and recording levels etc.