Before beginning your installation, correct any moisture problems you may have on your basement walls. It can be as easy as applying a waterproof coating on the inside of the wall to as complex a job installing French drains.
Step 1 - Attach the Furring Strips and Level the Surface
After correcting moisture problems, install 2x2-inch furring strips to the wall at 16-inches on center. Attach the furring strips with the appropriate adhesive or a rented ramset if you are attaching it to a brick wall. The furring strips will provide a firm, level surface to which you can attach drywall or paneling. The section on paneling will give you more in-depth instruction for attaching the furring strips.
To even slight irregularities in masonry or old plaster, it is likely you will need some shim material to get the flush the furring surfaces. Put a level on the face of the furring strips and shim as needed. A shim is a thin wedge of wood which can be purchased inexpensively in packets at your home center or made yourself from scraps of wood.
Step 2 - Measure, Cut, and Install the Foam
Measure and cut the foam to size with a utility knife or saw so that it fits snugly between the furring strips. Press the foam between the strips.
Staple a sheet of 6-mm plastic as a vapor barrier over the insulation. Do not staple it to the furring strips or puncture it unnecessarily. Gravity and the wall covering will hold it in place.
You will all the same tools for an exterior application, but with the addition of a shovel.
Step 1 - Dig a Trench
Dig a 2-foot trench along the exterior basement walls. Dig deeper in a colder weather area with a deeper frost line. Check with your local building inspector to follow the local code.
Step 2 - Attach the Foam
Use at least 2-inches of extruded moisture-proof foam panels on the exterior, since they are denser and more efficient than regular foam. They are also more durable. Place the panels right against the concrete and butt them closely against one another. Use an exterior adhesive to glue panels to the foundation wall.
To keep water from getting in between the foam panels and the exterior foundation walls, push sheet metal flashing up under the siding and hammer it into place over the foam panels with galvanized nails.
Step 3 -Provide Drainage
If you have a drainage problem, now is a good time to install a drain pipe. Install it at a slope and connect it to drainage outlets.
Step 4 - Finishing Up
Back fill the previously excavated dirt to hold the foam panels in place around the foundation walls. Plant grass seed or shrubs to prevent erosion. If you are installing a drain pipe, back fill the area with gravel. Cover the gravel with tar paper, then bury the tar paper with the excavated dirt.