I keep all of my passwords encrypted in 1Password, and I have one encrypted folder on my Mac with all of my sensitive documents in it. I didn't want to encrypt my entire hard drive or even my entire home directory because of the performance hit.
I do the same thing, but in GNU/Linux, using pwsafe for passwords and dm-crypt for disk encryption. IMO the one downside is that I have to remember to put stuff in the right place, e.g. moving dotfiles with sensitive data into the encrypted directory and creating a symlink back to ~.
I also have a password manager (KeePass) but I'm not as disciplined about keeping all my files in one place. Also, as I said in my earlier comment, I want to make sure everything on the hard disk is secure, include any system temp directories.