Organizing closets has got to be one of my *least* favorite things to do, but I do it because if you can find the clothes you want you save yourself LOTS of time. I find that it's especially hard to organize my kids closets because I am rotating clothes in and out so often due to growth. I never know where to put the stuff that's too small, or too big and I usually end up trying to cram it all in. Last summer my son had things that he could have worn, but due to the fact I had everything jammed in I didn't even realize some of the items were there.
Invest in some plastic storage bins- they are so cheap and so worth it! Mine are actually fairly old, but still do the job. I have one stack of bins that are labeled "Too Small/ Charity" and another stack of bins labeled "Too Big". All of the items hanging are *just right* and in season. When I come across something that is too small or I know we won't wear anymore I throw it in the "Too Small" bin. When we receive hand-me-downs I put items in the "Too Big" bins. We are very fortunate to receive many hand-me-downs! I often buy items at the end of the season for my kids to wear the following year. Those items also go in the "Too Big" Bins.
Now days when I get calls from charities wanting me to donate used clothing, I simply empty the bin into a garbage bag, Voila! If you have an annual garage sale you could have a 3rd bin labeled "Garage Sale". Simple, easy, smart!