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It's recommended to create the 'Home' directory separately from the 'Install' directory, however if you've already combined the two directories this will help you untangle them...

1. Stop Confluence

2. Backup your current home/installation directory

3. Create a new blank home directory (parent only, no sub-directories)

4. Move the following files/directories to the new home directory

attachments
backups
bundled-plugins
bundled-plugins_language
config
confluence.cfg.xml
index
plugin-cache
plugins-osgi-cache
plugins-temp
viewfile

5. There are two sub-directories which will need to be created in the home directory:

logs

It's fine to leave this empty, however if you want to keep your existing confluence log move the atlassian-confluence.log file from the existing 'logs' directory to the newly created one

temp

This is also fine to leave empty

6. Edit the confluence/WEB-INF/classes/confluence-init.properties file to reflect the new home directory path (the one created in Step 3)

7. Start Confluence

Did it work?

If you've followed the steps correctly, your new installation and home directories should look like this:

Home

Confluence 3.5 > Separate the Home and Install directories in Confluence 3.2 > confluence-home.jpg

Install

Confluence 3.5 > Separate the Home and Install directories in Confluence 3.2 > confluence-install.jpg

You should have no problems starting Confluence, and the log files should be updated as normal.

If Confluence tries to load a new site (such as in a new installation) you'll need to confirm that the home directory path is specified correctly in confluence-init.properties.

If you find you're unable to search or the recently updated menu isn't showing any content try rebuilding your search index via Confluence Admin > Content Indexing