For someone that is interested in fashion, I own surprisingly few clothes. Ok, I guess that is a pretty subjective statement, but we have a seriously tiny closet in our flat here in London, and all my clothes fit in there. But even if I had more space, I wouldn't buy more clothes. My ideal wardrobe would be small, but every single item would reflect my personal style perfectly. I'm still far from that state (of closet heaven), but it has gotten a lot better since I have started to do some planning, regular editing, generally avoiding undirected impulse shopping. One of my favourite fellow 'less is more' advocate is Dead Fleurette, check out her blog for inspiration on how to plan your wardrobe.
I think the first step towards a great, functional wardrobe is finding out exactly what you want your personal style to be like. My favourite way to do this is to create mood boards! I make new mood boards all the time, at least once a season, and they are always a little bit different from the last one. Mood boards are great because they do the job of visualizing your ideal personal style for you and they are something to which you can always refer back to when you need inspiration. Once your mood board is done, you can analyze it, identify themes and figure out which elements are missing from your current wardrobe. Read this post for a step-by-step guide on how to dissect your mood board.
Collect pictures of everything that inspires you in some way regarding your style. It is best to give yourself some time for this and just continue to do what you are probably already doing: Read blogs, magazines and go fake-shopping (browse through (online-)shops without actually buying anything :)). Websites like Lookbook.nu or Style.com are also great sources. Whenever you see something that inspires you (even if you don't know why) cut it out, save it or make a note of it. These could be pictures of whole outfits, single items, beauty looks, ideas of a certain type of look/style, colours, textures, anything. If you find someone whose style you like, research them further. Some things might not be on any blogs or in magazines because they are not a trend at the moment. In that case just do a direct search online for pics.
At the end you should be left with a big pile of pictures (real-life or electronically). Go through every pic and think about why you like it. Identify themes. Maybe you are drawn to bohemian outfits or classic tailoring; group your pictures accordingly. Now search for outfits, that you would want to wear pretty much exactly and put them in a separate pile (I collect mine in a folder called "Try soon", see below). Write down all themes you could identify: these could be item or colour combinations, hairstyles, makeup looks, specific items or even a particular feel. Let this list guide you the next time you go shopping or try out new looks.
This is how I organise all the pics I find online via iPhoto:
Now pick your favourite pictures, maybe print out ones you found online and stick them onto a big piece of cardboard. Put it up on a wall next to your closet. You can also create different kinds of mood boards, like a nighttime and a daytime one, or special ones for hair and makeup. Remember that mood boards shouldn't be static, they are something that should evolve just like your style.
Here is a mood board I made last summer. It doesn't reflect my inspirations 100% anymore, so I am currently working on a new (bigger) one, I will show it to you when it's done.
Do you have a mood board?