Text files use up very little space, and I play with video files a lot, so I have beaucoup space available, so I can't help you much there, other than to suggest that you immediately invest in a few inexpensive "thumb drives" (also called flash drives or USB drives) so that you can back up your stories from time to time (every time you sit down at the computer is an excellent habit, like brushing your teeth). Twenty US Dollars (or so) will buy eight gigabytes of storage, which will easily hold all your stories, a small bunch of pictures, and the Encyclopaedia Britannica. Buy two if you're paranoid, which every writer should be. Disk crashes rarely call ahead for an appointment, so having the fruits of one's labours sitting in a desk drawer is terribly handy, and even handier if you have a duplicate at work or other offsite space, which will likely survive fire, flood, and hurricane as well.

I use a plain text programmer's editor plus a macro add-on program that allows me to insert "boilerplate" with a few keystrokes*, but MS Word is perfectly adequate if you're comfortable with it. You can turn an MS Word document into plain text (more or less) by simply copying the words off the screen -- Ctrl A, Ctrl C for Windows / Apple A, Apple C for Macs -- and then pasting them -- Ctrl/Apple V -- into a plain text editor.

Puddin'
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* For example, if I type "loremxxx" my little utility produces a string of nonsense text so I can see how a layout looks without going to the trouble of typing much of anything:

Proin at eros non eros adipiscing mollis. Donec semper turpis sed diam. Sed consequat ligula nec tortor. Integer eget sem. Ut vitae enim eu est vehicula gravida. Morbi ipsum ipsum, porta nec, tempor id, auctor vitae, purus. Pellentesque neque. Nulla luctus erat vitae libero. Integer nec enim. Phasellus aliquam enim et tortor. Quisque aliquet, quam elementum condimentum feugiat, tellus odio consectetuer wisi, vel nonummy sem neque in elit. Curabitur eleifend wisi iaculis ipsum. Pellentesque habitant morbi tristique senectus et netus et malesuada fames ac turpis egestas. In non velit non ligula laoreet ultrices. Praesent ultricies facilisis nisl. Vivamus luctus elit sit amet mi. Phasellus pellentesque, erat eget elementum volutpat, dolor nisl porta neque, vitae sodales ipsum nibh in ligula. Maecenas mattis pulvinar diam. Curabitur sed leo.

I have other macros (the word is a shorthand way of saying macroinstruction, a single instruction that expands into a larger number of instructions) that allow me to produce various special characters without having to memorise numeric values or type the necessary keys: — Em Dash by typing emxxx, “Curly Quotes” by typing qqxxx, « French Quotes » by typing frqqxxx, and many more, including many that produce complex structures on the page, like this:

dlxxx

Produces this skeleton

XXX

DD2

YYY

DD3

ZZZ

DD4

which allows me to produce a simple list with associated text indented. Such lists are often used for "dictionary-style" definitions.