I have a 1910 bungalow with an unfinished basement. The issue I'm encountering is that the main floor gets extremely cold in the winter and requires a lot of heat ($$$) to keep it warm. The unfinished basement has no insulation whatsoever, and I haven't done anything to keep the cold out other than spraying foam to plug up the gaps around pipes entering the house from the outside.
My thought process is that by insulating the unfinished basement, it won't get quite so cold, and less heat will escape downstairs/less cold air will creep upstairs. According to energy.gov, insulating the walls in a basement is preferable to insulating the ceiling between the basement and the main floor, so that's what I'm looking to do.
This is a photo of one of the walls in the basement:
I've seen lots of videos on how to insulate when you have a solid concrete wall in a basement, or how to insulate new construction, but I'm at a loss for how to approach these walls, as the top half appears to be reverse side of the bare siding and the bottom half the foundation.
How do I insulate this whole mess without risking moisture issues? Do I build a stud wall in front of the existing wall from floor to ceiling, leave an air gap between the bare siding and add a foam insulation board, then put fiberglass insulation against the foam board up to the face of the new stud wall, then attach the vapor barrier? Do I put foam insulation board directly against the concrete at the bottom or do I need an air gap there as well?
Any help (especially a diagram if possible) would be very much appreciated!