Most of us have far too many items of clothing. Because these days most clothing for sale in the US is made by cheap labor in the third world, it's fairly inexpensive. So we buy something for a special occasion that we'll wear once, or buy something and decide we don't like it, but not enough to get rid of it. Or we do like something, so we buy another one or two just like it.
Medieval people did not have the luxury of the overstuffed closet (and yes, I'm looking at me). Cloth was woven by hand and sewed by hand (no sewing machines until the later nineteenth century), so making it was labor-intensive. Town people could have clothing made for them, but country people made their own. Most people would have two outfits, one to wash and one to wear (no pajamas, they slept naked). When one outfit got thoroughly worn out, they'd get another.
The basic outfit for both men and women was a tunic, essentially a long-sleeved T-shirt. For men it would be about knee-length. For women it would be floor-length. Elegant women preferred dresses cut on the bias, so they would accentuate their form. Sleeves could be so tight that it was impossible to get the dress on or off, so they had to be separate, sewn in place each day once the woman had wiggled her way in (this is way before zippers). For riding, men would wear trousers ("breeches"), but much of the time they were happy to show off their manly legs.
Wool was the most common fabric for clothing, which is why sheep-raising was a major activity, especially in areas like the British Isles where the land wasn't as suitable for crops. The other major kind of cloth was linen, made from flax, a grass-like plant that could be spun and woven like wool. Women might wear a linen shift (essentially a slip) under their tunics.
Everyone wore long capes as their outer clothing, with a hood to keep off the rain (the umbrella was centuries in the future). They also wore stockings, woven rather than knitted, as knitting was not invented until the end of the Middle Ages. These were held up either with wrapped bands or what was essentially a garter belt (for those who remember garter belts), a belt worn under the clothing with laces hanging down ("points") to tie to the tops of stockings. Shoes were individually made for each person's feet.
(Click here for information on medieval underwear.)
The cloth trade was a major economic activity. Raw wool from the British Isles was imported into what are now the Benelux countries, where it was woven into cloth. This cloth would then be sold at the great trade fairs in Champagne (the region in northern France, after which the drink was named some centuries later). Some of this wool cloth would be taken to Italy, where it was dyed--the Italians had special secret ways of producing good red-colored cloth. Once dyed, it would be back at the trade fairs to be sold for substantially more than undyed cloth.
If one did not have Italian reds, one's clothing was either natural (off-white) or else a choice of muddy green, dark blue, or brown, which if dark enough passed for black. Unconvincing yellow was also possible. We have no idea how lucky we are to have modern chemical dyes.
The luxury fabrics were cotton and silk. Cotton first appeared in the west in the late twelfth century and made possible actual underwear, which they'd pretty much done without. Silk was known throughout the Middle Ages, but because it was imported from the far East, it was always extremely expensive. It came on the so-called silk road from China, across central Asia, to fetch up in the eastern end of the Mediterranean. Silk was valued for its color--you could get a brilliant green silk--for its softness, and for its resistance to cloths moths. No one believed the ridiculous story that silk came from worms.
The wealthy had luxurious clothing that probably cost as much (proportionately) as we'd pay for a car, both because it was good to have more than just a few serviceable outfits and because it was an excellent way to show off.