When I started my journey in SL, I remember how limited my activities were because I had so few items! I couldn’t fly high, because I had no gadgets that would help me to overcome the 300m fly limit. I couldn’t go to a club, because I had nothing to wear. I couldn’t hug a friend, because I had no animation hud. It seemed I had nothing. So I started shopping.
Very soon my inventory exploded from 1k to over 5k of clothing, furniture, gadgets, scripts, textures (it took me 2-3 hours, btw). I realized I couldn’t look through all of them, so I kept most of the boxes unpacked. Guess what happend? Those unpacked boxes stayed unpacked for two years! I’ve just had no time to look back. So, in the end, I trashed them.
Later on, I started creating my own things, builds, uploaded textures, scripts. My inventory was exploding exponentially. I had to do something. There were tons of textures, objects that I couldn’t trash because they were used in my designs. I started to get lots of invitations to malls, events, and promotional items. I was escaping to clean my cache for one reason only: I couldn’t stand waiting till all my inventory would fetch. So, after struggling with my inventory for awhile, I realized there were some strategies that can help me to overcome this digital disaster.
My inventory hasn’t exceeded 12K of items for more than a year now. Each month I get even more invitations, I upload even more textures and I go shopping regularly. How do I do that? I will give you some tips, which are not magical, but have helped me, so I hope they can help you, too.

Tip #1 Trash it!If you have never used or looked at an item/folder, the chance is very high; you’ll never do so. So trash it!
…
What stops you from doing this?
Curiosity about what is in there? If you were so curious, you would have looked at it already.
Regrets about loosing something valuable without knowing about it? If so, go and look through everything, spend hours browsing, rezzing, sorting it all, you’ll know for sure, you didn’t miss a thing.
You still can’t trash it? You just can’t let it go? You really can’t? Then I am sure, your real home looks like a warehouse too You must be keeping all those wires, old videotapes, shoes, postcards you never look at, probably once when you’re packing while moving to another home.
But, if it is really impossible for you to trash some items, because you heart starts breaking thinking of it, there is a way to keep them and reduced your inventory (unlike in rl).

Tip #2 ArchiveHow to archive:
*You rez a box, drag and drop in as many items as it can handle (I prefer around 100, otherwise it will take much longer to open); For full permission items, such as landmarks, you can also use a notecard.
*Name the box something like ‘Archive: Textures’;
*Take the box into your inventory and put it into special folder named Archive;
*Trash those items you copied into the box;
*Clean the Trash.

Tip #3 ManageThe best way to keep your inventory in order is to sort things BEFORE and NOT AFTER. What does this mean?
*Name or tag your items and folders.
*Sort those items you need, put them into prepared subfolders and regularly delete those items that were not sorted. Do it each time before you log off.

An example with the Landmarks folder:
*Make some subfolders in the subfolder Landmarks: Shopping, Clubs, Exploration and so on. You may create extra subfolders in the folder Shopping, something like Appearance, Clothing, Shoes, as many as seems reasonable and manageable to you. Making too many subfolders can make it less manageable.
*Each time you get a landmark, put it into one of the folders you created. It takes you couple of seconds, but saves hours sorting them out afterward.
*Later, on Your Inventory Cleaning Day, you can filter Landmarks and delete all those you haven’t sorted into your folders, without teleporting to those places. (If I occasionally come to a place that dissappeared, I trash that landmark and do a new search for a new location. It takes less time than teleporting each time to a place to see if you still need that landmark.)
The same process of management is useful for Objects, Textures, Scripts, Snapshots, Clothing, Appearance, Notecards. There are a lot of items that you don’t need, so don’t waste your energy on them, trash them as soon as possible. Keep only those things you need. If you are sure you need them, make a subfolder ‘Unsorted’ or something similar.

Tip #4 Y.I.C.D.
Your Inventory Cleaning Day. Make it a habit. Once a month would be enough. Put it in your agenda. Make it a fun time with your friends.
*Go to a sandbox or a place that can handle some extra prims. It’s a good place to rez those objects you are not sure about. Remember: deleting a rezzed object doesn’t delete it from the inventory, if it has copy permissions. Delete it from your inventory immediately, as well, if you don’t need it anymore.
*Filter and trash: bald bases, duplicate items, demos, objects named ‘Object’, unpacking scripts, hover texts scripts, all unsorted landmarks, notecards, textures etc. If you were following my tip #3, it won’t take long. If you constantly leave items unsorted, you will end up spending more time on this stage (if you don’t know how to filter, see Link)
* Trash or Archive.
* Clean the Trash.
* Feel free from those extra 10K items you didn’t need.
* Go celebrate!

For more inventory management tips you may want to check:
“Inventpry Management tips” on Second Life Wiki
“Inventory Management 101” on SL Nowt
“Tutorial: Inventory Management” on Sheek
“Inventory Explosions” on Shopping Cart Disco