Basic user - need backup entire h.d. or just important files?

This probably seems elemental, but I'm wondering whether as a basic user (I write, download some things from iTunes, etc.) I should be backing up my entire system or just keeping copies of my important files in several places (external media, online storage, etc.).
My instinct tells me that backing up the entire hard drive is overkill in my case. But perhaps I'm failing to visualize a possible disaster situation down the road...
Please shed some light. Thanks.

For a basic user, you need only backup the Home Folder as this contains all of that users documents, preferences, and settings and such. The rest of the volume is more easy to recreate in a complete failure -- the OS and apps can be reinstalled and then the Home folders restored from backup, which IMHO a lot more resource and time-efficient than backing up all of your apps and OS binaries repeatedly.
Also, I like to take periodic full backups (about once a month) and then take differential backups in between the full backups. Differential backups only takes copies of files that have changed since the last full backup. That way I can trash all the previous differential backups after a new full backup to save storage space.
Like this (for illustration purposes only):
Full backup 1, differential 1.1, differential 1.2, differential 1.3, Full backup 2, differential 2.1, differential 2.2...
After full backup 2 happens, I can optionally delete any of the 1.x differential backups since those changes are rolled into the new full backup. Old full backups can be kept or burned on to CD/DVD if you wish to be prudent.
Hope this helps,
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