We were getting better at this, but kids don't help. They need a lot of stuff just for basic living, and then you want them to have things that will mentally stimulate them as well.
Have a toddler and our solution to this was to basically box up most of her toys and outgrown clothes and give them to charity. We've done this for the past two years around November because she's pretty much spoilt at Christmas.
Meanwhile I've got old gear that I can't bring myself to get rid of so I just stuff everything in boxes under the house.