A dry and comfortable basement means a dry and comfortable living space above. In a heated basement, insulate basement walls with existing (or added) 2x4 wall studs with Kraft paper-faced or unfaced exterior wall insulation. Prior to insulating, all foundation walls should be checked for water leakage and corrective action taken. Install an interior finish material, such as drywall, as soon as the insulation is in place. It is not necessary to insulate the ceiling in a heated basement, but it will help control noise between floors.