Categories or folders—which is the better way to organize items in Outlook? Both have their advantages and disadvantages. You might want to try both methods, depending on the type of information you need to organize and other factors, and see which works better for you.

Take contacts, for example. If you want to have your business and personal contacts appear as two different address lists in the Outlook Address Book, you need to segregate these contacts into two separate folders. However, if someone is both a personal and a business contact—with records filed in two different folders—you must make any changes to that contact's information in both places; Outlook doesn't automatically update the second record for you.

The alternative is to keep all contacts in the default Contacts folder and assign them categories such as Business and Personal. You can mark a contact as both Business and Personal, if you like. Organizing contacts by category means that you'll see them all in the same Contacts list in the Address Book, but you'll never have to update a contact in two different folders.

After you've organized contacts by category, you can either use the By Category view to group contacts by category or create a separate view for each category that includes only contacts that fit that category. One caveat when using categories to classify contacts: Don't expect a Microsoft Word mail merge to be able to filter on the Outlook contacts' Categories field. Although Outlook easily and accurately filters by category, Word's mail merge query doesn't. For example, if you use the Personal category to query for items in a mail merge, the results won't include items marked with both Personal and Business categories. The solution is to start a merge in Outlook by selecting the contacts whose information you want to use in Word. The By Category view makes this task easy. Then choose the Tools, Mail Merge command in Outlook to launch the merge.

A similar categorization technique can also work with the Calendar folder: Mark each item with one or more categories, then use a filtered view to display only business appointments or only personal appointments. If you have Outlook 2002, you can use the Automatic Formatting feature to create rules that apply different colors to your appointments depending on the categories. This technique works best if each appointment or event has only one category.

Many people move email messages into different folders either by hand or by using Rules Wizard rules. A rule is an especially good technique for handling messages from high-volume mailing lists. By putting the list messages into a separate folder, you reduce the clutter in your Inbox. Outlook 11 will strengthen folder-based message management by consolidating unread or flagged messages from multiple folders into one view.

If your Inbox is too chaotic even after moving list messages to their own folders, you can try custom views that use filters or automatic color-coding. In her book "Overcome Email Overload with Microsoft Outlook 2000 and Outlook 2002," Kaitlin Duck Sherwood describes a system that combines a custom view with rules that apply categories to incoming mail. The result is that the top of the Inbox shows your most important messages, not your most recent mail. After using her system for a year, I find myself spending more time on the messages that really matter and less on the ones that don't.

One final key factor in how you organize items is whether you use a PDA and if so, what synchronization software you use to copy data between Outlook and your PDA. For example, the latest version of the ActiveSync program that comes with PocketPC PDAs such as Hewlett-Packard's (HP's) Compaq iPAQ can synchronize subfolders under the Inbox, but for other Outlook data, it handles only the default Outlook folders. If you've split your Calendar or Contacts into Personal and Business folders, you might need to use a third-party syncing application that can handle multiple folders.