How to Conduct a Closet Cleanout  
I'd like to share some tips on how to make this process as painless and productive as possible. Keep in mind, everyone should alter this process slightly to fit their own personal wardrobe needs. 
The goal is to look into your closet and see manageable options that you like, rather than starting the day staring into the closet abyss hoping for the best. Purging is meant for items that don't fit well, are not your style or color, are outdated or worn, or are simply useless. The cost of the item, designer label, or the fact that tags are still attached, does not change the above  mentioned criteria. The clutter of unused items in your closet prevents you from clearly seeing and utilizing the gems that you do have, and/or prevents you from purchasing items that can further your wardrobe options.
Most of us hang on to things a little too long, for all the right reasons:
-It used to look good or worked well in your wardrobe
-It was expensive or is still new with tags
-It is a "just in case" item
-It was a gift and you feel bad giving it away
-it has sentimental value
So-how to decide what to keep and what to purge? There are many good tips out there, but I'll zero in on my personal experience as a wardrobe stylist, having assisted many customers through this process.
I suggest working by category of clothes(work, casual, summer, winter). It can be overwhelming to attempt your entire wardrobe in one shot. Break it down into whatever steps it takes to accomplish the goal-purging!
1. Try on an item that you love, it feel good and looks good and you love wearing it, take a self photo. Study what you like about how you look in the item. Use this as a comparison as you try on other items. It becomes easy to discard items that don't look good when you have the choice to wear something that does. As you try on the rest of your wardrobe, the items that look great, or at least good, are keepers.  Items that are not complimentary should be put in a pile for re-sale, charity, or the garbage if necessary.
2. Some items may be waiting for repair, or alterations and/or some items may seem like they would look better with slight alterations. Place those items in a separate pile and really make that appointment. A seamstress can tell you what can be done to alter an item and if it it's worth doing. 
3. Does it fit your current lifestyle? It is normal to have several lifestyle changes over the course of years. There will be careers, children, promotions, career changes, retirement. Your wardrobe should change just as your life does. This the reason you need to discard some older items, and add some new items. Don't hang on to things that you will probably not use again. Keep in mind that you will not wear suits that your wore twenty years ago if you are currently re-entering the work force, you will not wear a closet full of stilettos if your social life now consists mainly of soccer games and dance practice, you will not wear the aerobic wear from the 80's if you're taking a current yoga class. There may be a few pieces that transcend time(more on that later), but for the most part you will want something new and current for any new venture you're pursuing. Ask yourself as you go through your wardrobe items, "Do I need it for my lifestyle now?", and "Does it look outdated?" You can ask for an opinion of a friend or family member,(or better yet a neutral party that you won't want to strangle), but ideally go with your gut. If you have no current use for it, or you feel uncomfortable in something, you're not going to wear it.
4. Have you not worn it in 12 months, two years, any given time period?
My answer to this rule of thumb is not about the time frame but about the item. Most special occasion items fall into this category because they are not everyday pieces.
The main question is: If you had an appropriate occasion come up, is this a wardrobe item that you would love to wear? Does it make you look and feel fabulous? If the answer is yes, you may wear it again. (Example: an amazing gown or cocktail dress). If the answer is no, you're going to shop for something new anyway so there is no need to keep it. It served it's purpose and it's time to move on.
5. "Just in Case" items. Just in case of what? Really-chances are if you are not choosing it regularly, then you won't choose it for anything in the future-it probably needs to go. Those items you try on and then change out of-that's your inner stylist telling you something about just doesn't look quite right.
6. Sentimental Items. I believe some sentimental items can be incorporated into and can have a special meaning in your current wardrobe. Other items have to be let go in order to prevent hoarding. You can take a photo, or perhaps cut a piece of the fabric to store in a memory box. (Maybe pair down those old college tees that you can't part with to three or four, fold, and store in a drawer). Certain items such as wedding dresses or christening gowns need be stored appropriately and taken out of the everyday clothing closet.
Take Inventory-Make a List
Your purged closet will now allow you to see where there are gaps or over-abundances in your wardrobe. Maybe you have a surplus of tops, with no matching bottoms. Perhaps you need a pair of high leather boots to pair with those winter skirts or skinny jeans. Maybe you realize you really need an updated spring jacket, or new sandals for all of those summer dresses. Maybe you lifestyle requires more casual wear and less dress wear, or vice-versa. It's time to take an inventory, make a list, and shop with a purpose. I compare this process to grocery shopping-if you shop for groceries without a list, you may spend a lot of money, bring home a bunch of random food items, but still can't make dinner. If you make a list, and buy just what's needed to follow a recipe, then you have dinner. The outfits you want to create are your recipe. Stick to your list.
Note: Some wardrobe pieces that may be able to be salvaged:
-a suit jacket(wool or boucle' for example) may be able to be paired with jeans, a t-shirt, and layered necklaces
-a wool suit skirt may be able to be paired with tights, knee-high boots and a sweater
-an old t-shirt may be able to pass as a vintage look(maybe)!
Use your discretion.
Last-but not least-What items are splurge worthy that last throughout the years?
These are items that can last for years, even decades. They will get you through work weeks, dinners, special occasions, and so much more.
1. A Little Black Dress. LBD. Classic style, approximately knee length, not too short no plunging neckline. A classic style should easily suit many different occasions with a change of jewelry, shoes, handbag, and wrap. If you are not a dress person, make this a dressy black top and pant/skirt or pantsuit.
2. A White Dress Shirt. It can be worn with dress pants or jeans. It can be worn alone, or layered under a blazer and/or sweater. It will always serve a purpose in your wardrobe.
3. A Perfect Black Blazer. Classic in fit, style ,and quality fabric. You may have many other blazers; over-sized, shrunken, patterned, but choose one classic blazer that does not show a current trend.
4. Trench Coat
5. Black dress pants
6. Dark Wash Boot-Cut Jeans.
7. Black Heels or Flats
The above listed in 4 through 7 need to be of good quality and fit.
8. Diamonds and Pearls. A dear lady and friend said to me once-" My best colors are diamond and pearl". And they're yours as well. The color, size, and style fit everyone beautifully.
9. A Fine Timepiece. An elegant watch adds instant polish to any outfit.
10. The Classic Handbag. Quality leather and style. It goes with everything! ( Some would say you can never have too many)
11. Scarves and Wraps. Instantly change the look an outfit, or pull together colors to create an outfit.
All the above items can be used regardless of occupation or lifestyle. All items can be utilized with some of the other items on the list. These are staples. The rest of your wardrobe should be built around your current needs.
Special Note:
Sentimental items. Some sentimental items may be kept alive with a photo, or may need to go into appropriate storage so as to not take up closet space as mentioned earlier. However, I also think it can be lovely to revive an item that has personal meaning to you. Some items such as a piece of jewelry, a handbag, a brooch, or vintage clothing, can be re-stored or re-styled so that you enjoy wearing your treasured piece for years to come.
Remember-at the end of this picking and pitching is the reward of an organized closet and a shopping list ready to be filled! More on what to buy and how to shop for your body type coming soon!