Meg Hanlon was looking for a small place to start over with her two children. At the same time, a 1926 five-room bungalow in Chevy Chase, where one woman had lived for more than 60 years, was looking for a new owner. It turned out to be a very good match.

Two years ago, the newly divorced Hanlon, her daughter Elena de Toledo, her son Nico de Toledo and a posse of cats and dogs, moved in. After a top-to-bottom renovation, some creative space planning and spirited decorating, the house is a cool 21st-century family home.

The outside of the cottage, with its freshly painted lime green door and bird-shaped cutouts on the blue Shuttercraft shutters, projects its new look.

“My goal was to make a cozy, peaceful nest for us here in this tiny house,” says Hanlon. “The place looked like it could be at the beach or in the country.” The move meant a major lifestyle change for Hanlon and the kids. They were relocating from a five-bedroom, five-bath Bethesda home on an acre of land. “I did worry about how I would give the kids something that compared to that. It had to be special, but not big,” she says.

The kids were on board for the bungalow from the start. “It had good energy,” says Elena, now 12. “It sort of felt like a cabin.”

To make the place work, Hanlon had to use every inch of the 1,500 square feet. “We had to figure out how to fit ourselves in,” she says. They even remodeled the one-car built-in garage into a minimalist teen bedroom for Nico, 14. The kids were eager to create their own rooms and participate in design decisions. “We had to get rid of things we really didn’t need,” says Elena.

They sought professional design help to make the most of small rooms and shallow closets. “I knew the spirit I wanted with lots of colors and fabrics,” says Hanlon, 47, a teacher at Stone Ridge School of the Sacred Heart. “But I was having trouble with details.” The Oriental rugs and heavy draperies from their former home would not work here. They needed a fresh budget-friendly approach.

Hanlon hired designer Elizabeth Wilson Boland. Together they worked on plans to maximize the kitchen, carve out more living space in the attic and basement and bring in personality. Now the cottage is the definition of homey: Reclaimed vintage benches and settees are upholstered in bright prints; the basement has a yoga/workout room with a bamboo floor; and 1940s-style aprons and large mirrors dress up the rooms.

Boland, 28, a partner in the Bethesda firm Design in a Day, started by picking a palette of paints. Hanlon and her kids were fearless: “I had to talk them out of

painting the house pink,” Boland recalls. They all sat in the dining room and selected watery blues, banana yellows and apple greens. These colors set the stage for the upholstery and pillow fabrics.

The plan was to avoid changing the footprint of the house. The front door, with its new owl door knocker, opened directly into the living room. On the right would be Meg and Elena’s bedrooms and the bathroom that would become the magenta (Benjamin Moore’s Rhubarb) “girls bathroom” crowned with a crystal chandelier. There was a small dining room opening into a kitchen that had dated appliances and dark cabinets.

They reorganized and modernized the kitchen, squeezing in a small white marble island with three stools. They built a porch alongside the kitchen furnished with retro rattan furniture left by the former owner. Boland also opened up some of the doorways on the main floor, making them wider and taller to make spaces flow better.

Hanlon was hoping Nico could use the attic as a bedroom, but he was getting too tall for the sloped roof. Instead, the attic became a hangout room with bean bag chairs, board games and shelves of children’s books. She and Boland hatched the plan to convert the garage into Nico’s bedroom. “At first I thought it would be weird, but it turned out really cool,” he says. The room has a queen bed and a small closet, period. Nico says, “I liked the idea of only having a bed in my room because I don’t like clutter and I do my homework at the kitchen table.”

The family’s large collection of books still presents a problem. Boland built in shelves in the dining room and bedrooms. They organized and shelved by topic: cookbooks, poetry, nature, language, children’s books. But there are still stacks of books in the basement with no permanent home.

The challenge of living in a small space is that there is always more stuff to find a place for. “Meg still has 13 appliances, like blenders and juicers, sitting on the kitchen floor,” says Boland. “We are still figuring out where to store them.”