There isn’t one “correct” system—the key is to choose clear criteria and use them consistently. If needed, write your rules down so you’ll actually follow them.

A practical approach is:

• First pass: use pick/reject flags or ratings to cull and judge image quality.
• Color labels: use these to track workflow status, such as whether a photo has had color work, needs further edits, or requires special processing.
• Keywords: use them for subject matter, and optionally to note specific edits or external work done in Photoshop or similar tools.

One example workflow is:

• Do a color/editing pass and mark images that have already had color correction.
• Then do a rating pass to separate stronger shots from weaker ones.
• Use additional color labels for photos needing extra retouching or special edits.

The exact meaning of each color or rating matters less than keeping it simple and consistent. If your system becomes too complicated, you probably won’t use it.