Get rid of the fakey fake shutters in favor of something more realistic. They are much too small for the size windows they are supposed to actually cover. Maybe add a window the the right hand facade. And maybe paint the railings white and do a bright colored door. I'd live with the paint color a while unless you have 10K to drop on a paint job right now.

What is the siding? It looks like aluminum or PVC because of the tiny corner trim. If it is wood add 4"+ corner boards and perhaps horizontal water board at the bottom of the overhang.

The upper floor windows are actually touching the soffit which looks like some kind of goofy mistake by the builder. The house will never look right until that is corrected.

The easiest way to solve the window issue and make the house look like a lake house is to replace the roof with one that starts higher and is steeper. That would only be practical if you needed the half story space under the new roof and had space for a stairway.

10k to paint? Maybe in California, I live in Wisconsin. Since my boyfriend has sided a few homes, my thought is a wider vinyl siding, wider corner trim, a beautiful wood door, a door surround and more realistic shutters. Not sure on the color scheme, but since it is a wooded lot I want the home to blend, hence a darker color ie green/blue with either light gray or white shutters and white trim.

As for the windows touching to roof soffit, that's common in colonial homes (see picture example). I'm not saying it looks aesthetically pleasing, it was one of the first things I disliked and is more pronounced on my home because of the roof overhang (although, I'm glad it's there to help prevent ice dams). My goal is to liven up the exterior enough with details and a pleasing color scheme so that the downfalls aren't as noticeable.

I'd like to take as much inspiration from this beautiful house as possible. I found a colonial style door surround, the same door, I'd need new windows, the grey shake siding in vinyl, new window trim (possibly planter boxes on the lower & even upper) and deck paint.

Do new front doors require storm doors? I live in Wisconsin and there will be moisture on the door.

You've gone from a 10K paint job to a 60K wholesale replacement of the exterior. Do you really want to spend that much right now? Or are you planning to do it over time?

I'm in the dreaming stage, and once I have that planned I know how much to save.

Obviously, my house will not look as good as that one, but I can move in that direction.

Same door: $1,000 Home Depot
Colonial door surround $100 Home Depot
Blue shutters: 8 x $50 = $400
Vinyl shaker siding: $2-$6/sq ft?
New windows: 4 x ~$400 = $1200
Window boxes: can make those

Additionally, there's a detached 3.5 car garage with new vinyl siding to deal with.

I think the house needs bigger windows on the ground floor. Maybe a bay or bow? Because the door is to the right, you have to make it more important and something on the front of the house has to make it look like the front, not the back. Just not enough windows, but a bay will cost you about $6K installed. Just did one in Minnesota.
Also, I don't mean to be argumentative, but you want a lake house idea, but you're showing us your very-citified-colonial inspiration photo. Hmmmm, difficult.

But you are looking at flat front houses that you like. I think you need to find one that has the overhang like yours does. How do you intend to put a Colonial door surround in the space that you have available?

Good ideas coming in, thanks. The bay window and front and side porch will be highly considered.

As far as colonial vs lake house, I realize a full lake house conversion is out of my price range, but I would like to use blues and a dramatic color scheme that reminds me of lake homes in lieu of combos like white and forest green.

Here's the simple colonial door surround from HD (would look great under a new front porch):

Here is a link that might be useful: Colonial Door Surround

Here's a nice one with overhang

Here is a link that might be useful:

Porch inspiration...

Your "overhanging" Colonial is known as a Garrison Colonial.
http://www.pinterest.com/househunter4/what-is-a-garrison-colonial-house-style/