My advice is when out of the house think what you'd take if you had to temporarily relocate your family for two weeks/ a month and keep going to school/ work/ evenings out etc.
Think kitchen stuff, towels and bathroom basics, toys, clothes, shoes, coats. Also think photos, pictures, ornaments and special bits that feel like home.
Write a bit of a mental list for each category of stuff.
Now at home sit in your lounge and look around yourself. What didn't make the list? Which things are surplus to your immediate needs and comfort, what purpose are they serving? Likewise your other spaces.
In the kitchen have you got pans that you only use at Christmas or even every third Christmas? Could they go labeled in the loft/ a shed/ get charity shopped and then buy/ borrow when you need one.
We've been lucky and had a couple of self catering holidays this year. Living out of a bag, most recently five of us in a wet Wales caravan, makes you think about what you actually need. The children, aged 4, 9 and 11, need a few toys (are six drawers of lego really more fun than one?) and books but do they need a bookshelf/ case each or just a handful that you naturally replace every six months or so anyway with gifts at Christmas and birthdays?
We downsized from a house of 2500sqft to one under 1000sqft. It was a challenge esecially as we previously also had four sheds and a double garage. I had to think hard about what was played with and storage.
For DD, my youngest, we went through all the Peppa pig and playmobile sets and kept the stuff which would comfortably store in ikea Expedit storage drawers. Having a home for everything helps keep things tidy. Likewise with lego, the elder two have a lego shelf each of assembled models and hooks in their bedroom ceilings with fishing line supporting hanging models. We then have a large carefully selected box of lego bits for creative play. Its maybe 1/5 of what we had before but played with much more because they can zip down the box sides sitting at the table and all play. Before we had miscelaneous boxes, bags, a drawstring play bag, and the zip down box. It ended up everywhere when they got it out.
We have a messy play cupboard with a few nice paints, a paint pot and brushes, a box of stickers, foam, shiny things, balls etc for collages, a couple of tubs of playdough and cutters, a box of scissors, glue and tape, cut up dot to dot and colouring in sheets. Small tray boxes or crayons, pencils, pens etc. It also has a big oilcloth for throwing over the table.
I live in a cheaper area of the country but to upsize we'd be talking £60k for an extra room. That helps focus the mind when donating on unused stuff. The odd replacement if you do ever realise you needed it costs far less than buying extra storage space for your growing clutter.
Don't stress about it, just make a start. One drawer/ cupboard/ space at a time.