I work from home, and it is really important to me to look a cut above grungy, even if I am not going anywhere!
I do keep around an old pair of jeans, a college sweatshirt, and a couple of ratty t-shirts for yardwork and painting. Whenever I put similar items into my "donate" pile, I confirm that they are not an improvement over the current yard clothes before I toss them.
I often dress very casually--jeans, a sweater or hoody, and boots, say--when I have no plans to leave the house, but I don't wear unflattering castoffs. For my true loungewear (pajamas or the equivalent, which I put on at some point in the evening), I wear decent-looking fleece items mostly, which I replace once in a while. (I just bought two new pairs of fleece pajama bottoms at Kohl's yesterday, and Old Navy often has decent pieces for a song.) I do reuse old tees and tanks for sleeping in the summer, but only if they still look okay.
Last year, I had a cashmere sweater that pilled horribly after just a few wearings (shaving and brushing did not salvage it--it was a disaster). I considered repurposing it for sleeping or loungewear--but you know, it looked awful, and it made me angry to see it. So I donated it. I like to be comfortable and relaxed when I am at my most casual--and I don't like to be wasteful! I am the original thrifter--but I am not willing to look ratty, especially since I spend so much time at home.
