I've got a cottony coated Yorkie and a silky coated one. The cottony coated one I routinely have clipped to 1/2 inch or even 1/4 inch all over his body. He looks great, IMO. The silky coated one I usually keep longer (shanatink has threatened my life if I do otherwise), but one time when she wasn't looking I clipped him short, too, and he didn't look bad at all.
You can clip or shave around the butt to solve the dingleberry problem, even between formal groomings.
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