The biggest mistake, which directly leads to the original question above, is that you need to back up everything.
If you spend some time analyzing your data, you'll find out that not all data is equal. Loosely your data is split among:
1. actual work (spreadsheets, documents, etc.)
There are different attributes to those different types. Your work files are most likely the most important, they are also the least in size, and the hardest to re-create. Media does not change over time. New is added, but whatever is there, never changes. Programs are easily re-installed, same as OS.
What I'm saying is you need different backup strategies. For me, work files are backed up online via a service. Music media is backed up on DVDs, incrementally, so when new is added, only the new is backed up (and for me media is music only - for movies I keep the original DVD media, or if downloaded, I don't bother. They are re-downloadable. Same for programs - either I have the original, of if downloaded, I create a DVD media for it.
For my pictures collection I use a different scheme. I use online redundant synchronized copies. I have 3 copies. If one disk dies, after I fix the computer, I have 2 more copies to re-sync from.
I think that like any big problem - cutting into smaller ones gives simpler if different solutions to the parts of the problem.