This weekend, I spent a significant amount of time clearing everything out of my parents' basement. About half of the stuff in the basement was ruined, but it taught two important lessons:
1. Backups are worthless, unless they are regular and stored off-site.
My parents faithfully backed up their financial data every week to a floppy disk, which they stored right by the computer. Unfortunately, the pipe that broke soaked their computer and their backup disks. We haven't yet tried to recover the data, but if we do, we will have dodged a bullet.
2. Paper records are a pain and often not needed.
Since everything had to come out of my parents' basement, I got exposure to the amount of paper records that they keep. Frankly, I think that people keep a lot more records than they need to. Whether it's a credit card statement or bank statement, the bank can always pull back statements (usually for a fee). I think that the headache saved by not needing to manage records is well-worth the $50 that I might spend pulling a few years of bank statements. Many paper records were destroyed; it will be interesting to see if they actually need them.
For the records that DO need to be stored, I generally scan and store these on my computer, and then sort through them once a year. I think that this is a good practice.