Another Kitty shouted out in the group IM for me to post inventory organization tips so I rattled off a few quick ones. Here they are, expanded for the blog:
Don't accept half the freebies you get. You won't wear them anyway. (Okies, this was snarky, but I'm always hearing about people who seem to gather stuff just because they can.)
If you don't recall what it looks like a month after you get it, delete it. Better yet, donate it to a noob if the item is transferable. Tell them it's a gift from The Lucky Kitty Crew and create some goodwill.
Put dates on folders for the last time you wore something. Haven't worn it in 6 months? Delete it or give it away.
Open the map and use the Landmarks drop-down to see how many duplicate landmarks you have. Then delete them from Inventory. I almost never keep LMs anyway as I use Properties* to find the maker of the object and get the latest location for their shop from their profile. Done with LMs? Do a search for all things you have in duplicate. Gilly Wycliffe suggested scripts like Hover Text and Giver scripts. Also search for Object. Do this in a sandbox so you can rez the item to see if you should keep it. Rename it if you do keep it. Got more suggestions of things to search for? Leave a comment.)
Whether you have someone on your Friend list or not, when you have a person's Calling Card your inventory is scanned and that can cause your avie to freeze for a moment. Delete all the Calling Cards you have for folks NOT on your friends list. Maybe delete them all? I have a note card full of names from cards I've deleted and when. The few cards I have are from folks I've known for a very long time or have passed away in Real Life.
Many folks suggested using multiple inventory windows (Click File in the Inventory pane then New Window) to make moving things easier. Many suggested multiple folders. As you can see in this pic (click it for a larger view) I put folders inside Clothing to separate types of outfits. Then I marked outfits with (FAV) for a favorite set so I can search for just them and some say w/pic because I'm adding pictures to each outfit so I can see what it looks like before I wear it. That contributes to inventory bulk and can cost L$10 per image, but its often faster than constantly changing outfits. Think of it as looking through your closet. It balances time and inventory size. Starting today I'm going to add the date idea that I mentioned earlier. I also have folders for Separates: Shirts, Separates: Pants & Shorts, and the like for items that are not part of outfits.
You may have noticed a sub-folder called **New Stuff at the top of my Clothing folder. I put any new clothes, packed or unpacked, in there until I can try them on or otherwise sort them. This builds on Bewkie Effingham's advice to sort things right away. Otherwise everything ends up in the bottom of your Objects folder. I do much the same with other folders such as Note Cards, Landmarks, Objects, etc. And I have an Objects (Storage) folder to put my copies of everything (yes, that adds to bulk, but if I delete an outfit from Clothes and I have a copy .... see?).
Last big tip: Transfer everything you don't use regularly to your backup Avie. What? Don't have one? Even Linden Labs® recommends you have one. Anything that is transferable doesn't go to my Objects (Storage) folder, it goes to my backup avie (so yes, I have two alts, but one doesn't "play" ... he/she/it just holds things). The item doesn't have to be copyable, just transferable. And I don't mean an Alt that you regularly use in SL. They have their own inventory problems.
* Properties: Right-click any item in your inventory and choose Properties from the pie-menu. Then look at the Creator Profile. If they are bright they list their store location(s) in Picks even if they don't use Classifieds. This doesn't work with Objects sometimes so you may need to rez the item in-world. If you are wearing the item, right-click it and choose Edit. Is someone else wearing it or has it rezzed in-world? Right-click the item and keep choosing More... until you can Inspect. Then look at the Creator Profile. Inspect works only with prim items, not skins or the like.