This work presents a purely data-driven, wavelet-based framework for modal identification and reduced-order modeling of mechanical systems with assumed linear dynamics characterized by closely spaced modes with classical or non-classical damping distribution. Traditional Fourier-based methods often fail to reliably identify closely spaced modes or accurately capture modal interactions and complexities. To address these limitations, we propose a methodology leveraging the enhanced time -frequency resolution capabilities of the continuous wavelet transform (CWT). By selecting appropriate harmonic regions within the wavelet spectra, we effectively isolate modes, and then invert them back in the temporal domain by applying the inverse CWT (ICWT). In this way we reconstruct the corresponding modal dynamics in the time domain. Using the Hilbert transform, instantaneous phases are extracted for each identified mode, enabling the introduction of a complexified modal matrix which robustly characterizes the system's modal properties, even under challenging perturbations such as noise and uncertainties due to modal interference and unmodeled effects. The identified modal parameters are utilized to reconstruct the frequency response functions (FRFs) of the system and to develop a reduced-order model (ROM) that captures accurately the system's dominant dynamical behavior valid in a specified frequency range.. Validation of the methodology is conducted both with a numerical non-classical damping and an experimental testbed representing a model of an airplane structure. Results demonstrate the effectiveness of the proposed approach in resolving intricate modal interactions and accurately reproducing the dynamic response of complex structural systems.