This is a nice-looking living room with smaller rug. Perhaps the key is to frame the rug with sofas / sofa and armchair combo / sofa and the window. And another trick is to fill up the room so the size doesn't look awkward.
Shoes as Art: 10 Clever Shoe Storage Ideas for Small Spaces
Absolutely love this set-up! The headboard can be recreated using plywood, stuffing, fabric, power drill, decorative buttons- and the colors of all the marvelous bedding combined to be FABULOUSLY comfy!