From Microsoft:
9 tips to manage your files better
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Use Documents. For many reasons, it's smart to take advantage of the Documents feature (called Documents in and Windows Vista, and My Documents in Windows XP. To open Documents in Windows Vista, click Start, and then click Documents to discover an easy way to store your personal documents.
In Windows 7, the Documents feature is actually a virtual library. By default, the Documents library includes your My Documents or Documents folder and the Public Documents folder. You can customize the Documents library (in addition to the Music, Pictures, and Videos libraries that are also included by default) in Windows 7 to group files and folders from any location on your computer—without actually moving them. Or you can build your own libraries to easily organize your files. Learn more about working with libraries.
By using Documents in Windows Vista and Windows XP and by using libraries in Windows 7, you will be better able to:
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Find files. Windows provides easy access to the Documents folder (and its subfolders) in many places, including: the Start menu, the task pane in Windows Explorer, and common File Open and File Save dialog boxes, among others.
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Back up files. You should back up files regularly. Using Documents and libraries to organize them helps make backup a snap.
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Keep files separate from programs. By separating document files and program files you reduce the risk of accidentally deleting your documents when you install or upgrade programs.
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Adopt consistent methods for file and folder naming. Develop a naming scheme for the kinds of files you create most often and then stick to it.
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9 tips to manage your files better