I used to carry one of two nice leather bags. When I moved here and it was raining all the time, I didn't want to have to worry about the leather getting too wet, so I ditched them both for this bag:

http://www.rei.com/product/724185

I bought it on clearance last year (a different pattern) and it's all I use now. It's durable, easily smooshable, and it still looks brand new after 6 months of daily use. I can wear it messenger bag style while biking if necessary. It holds my timbuk2 wallet, cell phone, sunglasses, foldable shopping bag and keys (all I ever carry). I can also throw in a small water bottle, snacks, lists, etc...as needed.