The economy is not improving. We bottomed out and we are still there... at the bottom!
Personally, I downsized my lifestyle voluntarily so I don't feel the pinch, like my friends do. I had a 5 bedroom home on a third of an acre that I rented for almost $3000 a month. Now, I rent a 2 bedroom home with barely a yard for $900 a month. I converted the oversized kitchen into a bedroom using a room divider with curtains for privacy for a 3rd bedroom. I sold my baby grand. I sold my extra car. I took the extra money and paid off debt. So, while my earnings only increased by a couple of thousand a year in the last 10 years, my expenses were reduced monthly by about $2000. I did all this when I saw the writing on the wall. Taking immediate action pretty much saved my life. Because I did this, the kids still are in dance, sports, etc and never had to give up their extras. I still go out every week with friends to eat out, catch a movie, etc. Though I shop online for cheaper deals and love to go to thrift shops for their brand name clothes, I still buy new shoes for us and they still have spending cash to use with friends. If I still had that 5 bedroom home, the extra car and the extra bills, I wouldn't have been able to pull that off, with the rise in gas and food costs cutting into the budget. When times were good and I made so much more money (oh, for the old days!), I socked away several tens of thousands in investments. That's my emergency money. I've had to use it three times in the last ten years for unforeseen circumstances. The downside is that with the smaller house, I gave up a washer/dryer so we now hand wash our underclothes once a week (15 minute job) and use a small portable manual washing machine to wash clothes and line dry outside. This doesn't take more time to do laundry than it did before but it feels like more work, somehow.
Even so, I am so glad I downsized. Besides the monthly savings and extra money in my pocket, it also means less cleaning and less utility bills. So, though it may seem to people on the outside that I'm poorer by looking at my home, I actually have more money than I did before and travel to more places and longer than in years past, making for more awesome working-vacations! It was just a no-brainer to me all the way around. I'd rather have more money so I have peace of mind and have the lifestyle I want than to have bigger toys, which would have just stressed me out without any financial wiggle room