Decide how many characters you will need for your story. Using a pen and paper, write down a name and a brief description of each of those characters. For example, you could write "John Smith, age 9, curly red hair, freckle-faced, very mischievous." You don't need to be too detailed, as further description will come later in the process.
Draw a dividing line down the center of a clean sheet of paper. Label one side "Main" and the other side "Secondary." Place each of your characters under one of those headings. Your main characters are the ones upon whom the story hinges. Secondary characters are the people you throw in here and there to make the story more realistic. Secondary characters often include people such as the merchant, the barber, the preacher, the neighborhood bully, and so on. If you aren't certain if a particular character will be a main character or a secondary character, place them under the main heading for now. You can always go back and change this at a later time.
Create a folder for each character by labeling it with the character's name. If you have a lot of secondary characters, you may want to have one file for the entire group. You won't be gathering as much information about your secondary characters, so you won't need as much room in their file.
Design a profile sheet for each character. A profile sheet contains a myriad of information about your character, ranging from birthplace to personality traits. The specific details contained within a profile sheet help you, as the author, get to know your character inside and out. Only by understanding your character can you convey his life to others. If you are unsure of what information to place on your profile sheet, do a quick online search. Many writers' websites have character profile sheets that you can download for free. Print them off, fill them out, and then place each profile in the appropriate folder --- one profile per character.
Gather information that will be helpful in creating more life-like characters, and place that information in the appropriate folder. Such information could include items like pictures, newspaper clippings, journal entries, notes of observations you've made, quotes and even candy wrappers. If something reminds you of your character in any way, place it in that character's folder.