The first question is: where else can you put what's in your closet? If you put an entire category of things in another place, you'll remember to use them. So, your boots can go under your bed (admittedly, on their sides.) IKEA has canvas pull out containers (with wheels, I think) for that use. Second idea: clearly, a double rod would help. (Container store would work for that.) Hangars (blouses, skirts, pants) that hang in multiples vertically will help. (Linens & Things, Bed, Bath and Beyond.) Perhaps your bags can go inside each other and hang on hooks on the door.

I put an Elfa system in the (one and only) closet of my last condo after the poorly installed rack from the developer came crashing down. I loved the flexibility of it and it was pretty easy to install. Something like that might be useful for a small closet like this where utilizing every inch of space is valuable.

I would move the clothes rod up as high as you can reach - maybe around 6'-6" H, organize your clothing by length. That will leave you space on the floor of your closet to store your boots standing (put the taller boots under the shorter garments). You should have enough shelf space for some bags, and the rest you can hang on hooks on the back of your closet door.

I would either try to find an additional storage option for some of the items in your closet, such as a small wardrobe or even a small bench at the bottom of your bed (perhaps to store your pursees) or use every organization item you find find such as:

http://www.organize.com/closet-accessories-purses-handbags.html

http://www.organize.com/closet-shoe-storage-floor-racks.html

I also installed this system in my closet...

http://www.easyclosets.com/showroom.aspx?t=0&fi=-1&fe=-1

They weren't the easiest to install ( I would suggest asking a friend to help) but for such a small closet, it isn't so bad. My one closet was a 5 x 5' walk in, which was a little more challenging. This system arrives super quick and their customer service was great. I did a second closet about your size for around $500 with this company. You can add shoe compartments, double bars and shelves.

Good luck

upon further thought...I think you should do the following (which you can still design on easy closets as well if you decide to go that route or just do it yourself)

1. raise the top shelf a few inches so you can..
2. add a double bar (pants on bottom, shirts on top)
3. use dividers/spaces on your top shelf to hold purses upright or for shirt stacking
http://www.organize.com/closet-shelf-organizers-dividers.html
4. add shoe storage at the bottom

I think these changes will maximize your space

i'm having difficulty ascertaining how much height you actually have, but it looks like a mid height pair of boots fits perfectly fine so far under your longest piece of hanging clothing.

so there are two ways i can see this going.

1. without much renovation, you just switch it up. start stacking your tall boots and shoes up high, there's certainly enough space at the top to let those go up. and then put a stack of boxes or shelves down low to organize all your purses and other small accessories (scarves, belts, what have you).

2. agree with putting the curtain rod up as high as you can (remove the shelf) and then put up a shelf that has enough space above it for your purses and other things to stand up. then, underneath... like those upside down wine glass rack things, i would try to "hang" the boots. there's some shoe rack on the at site where you put the toes between two boards and it holds them in place. with this you'll be able to get two short boots over and under each other to maximize the space.

Do you own?

If so, you can always rip out the doorframe, header and wing-walls and install a wardrobe system or have custom cabinetry installed.

Inventory what you have in the closet by type, measure the closet and go to The Container Store. There, work with a designer to come up with an Elfa solution. In January it will cost you 30% less. If you wait until then, go early in the month because things get very busy.

The beauty of Elfa is that you can easily move things around until you get your space right.

See if ultra-thin hangers would work with at least some of your clothes.

If you put your boots into clear plastic boxes, which stack, you should be able to fit lots more of them at the bottom of the closet. Use the top of those boxes as a shelf for some of your handbags or buy a deep Elfa shelf if there's room above the shoes.

My parents had a similar setup in the 50 year old home. They are currently in the middle of ripping out the doorframe as they have two feet of unaccesable space on either side of the door opening and installing louvered doors.

I loved this idea:
"there's some shoe rack on the at site where you put the toes between two boards and it holds them in place."

But don't do it! All of your shoes will end up with dents in the toes. Better to store 'em elsewhere...

to do something fairly visible without spending too much:

-- take everything out of your closet and hang it on a freestanding rail.

-- buy new identical hangers.

-- decide what to toss, maybe too, what to dry-clean, what could be folded and stored somewhere else.

-- buy one of those shoe-organizers which can be hung inside the door. Use it to store underwear, socks, pantyhose etc. (that is, small foldable items).

-- use the space you gained by the last step to stow away your foldable items.

-- install double rods: the upper for clothing, the lower for boots (on those stretching devices) and handbags (which could be hung on hangers with clothing pins).

-- or: consider alternative storage for shoes & handbags close to you landing strip.

I agree with the elfa solution if you don't mind spending the money. Its a great way to maximize your space. Another solution...
Bed Bath and Beyond sells these great ultra slim space saving hangers. They come in a box of 50 and will save lots of room in your closet. You can see them here:

http://www.bedbathandbeyond.com/product.asp?order_num=-1&SKU=14492658

Also--The double hanger idea is great. Container store sells a double hang bar and if you have lots of boots definitely try these boot shaper hangers that Container Store sells. You can hang them on the bottom rod. You can view these here:

http://www.containerstore.com/browse/Product.jhtml?searchId=13955949&itemIndex=1&CATID=156&PRODID=59773

Maybe you could store your handbags on the back of the door, particularly since you don't need that space for storing shoes. Here's an over-door solution from Target:

http://www.target.com/Over-Door-Purse-Storage-Rack/dp/B000NBV9CO/sr=1-1/qid=1209838566/ref=sr_1_1/602-9373625-3828661?ie=UTF8&rh=k%3Aover-door-purse-storage&page=1

Have less stuff.

For $200 to $300:

1. Display your boots! Buy 4 wall mounted shelves (Ikea LACK for example: http://www.ikea.com/us/en/catalog/products/00011013) that your boots could neatly stand up on (put a rolled up magazine in each boot to keep it's shape...cheaper and more earth-friendly than buying those expensive boot inserts). You could mount these next to the closet or in the entryway. ($100)

or....Put the boots on the top shelf...again, use the magazine in the boot idea to keep the boots upright. (free)

2. Get a hanging purse organizer for the back of your closet door (or mount lots of hooks) http://www.ikea.com/us/en/catalog/products/00011013
($10)

3. Get all matching hangers (again, Ikea has very nice wooden ones at a very reasonable price) It may seem like an unnecessary expense, but goes a long way towards making things organized and accessible. ($25)

4. If you have room by the front door, an entry unit like this STARK one from Ikea would help store your coats and things you need quick access to and act as a landing strip: http://www.ikea.com/us/en/catalog/products/90111541 ($100)

5. Once the floor is cleared, you could get a storage shelf for folded clothing or to hold baskets for accessories http://www.target.com/3-Open-Shelves-White/dp/B0002I6FGI/qid=1209989671/ref=br_1_2/601-5314144-5585721?ie=UTF8&node=13814321&frombrowse=1&pricerange=&index=tgt-mf-mv&field-browse=13814321&rank=pmrank&rh=p%5F3%3A%240-%2424&page=2
($20)

6. Add a double hang closet rod http://www.amazon.com/WHITMOR-DOUBLE-HANG-CLOSET-ROD/dp/B000QWKP7K/ref=pd_sim_k_title_4
($6)

Sorry for the self-promotion but... since one of the problems is purse storage - I sell a purse hanger that hangs so you're storing the purses vertically. You can get about 5 things on each loop. They come in a lot of different fabrics too. http://store.citymouseshop.com/hahopuor.html