Fear mongering about "privacy and identity theft" is largely industry hype designed to break into your wallet. I am not saying that identity theft doesn't occur, but that it occurs in ways that aren't made safer by using software products sold to protect your privacy. Nor does it usually occur from your computer. Relax. Here's all you need to do:
a. Make sure your anti-virus and firewall is current and effective (see above.)
b. Give out your personal information as little as possible online. (this is key)
c. Learn how people voluntarily give their identity away.
d. Setup your credit or debit card to send you a text for every transaction.
e. Reject fear and paranoia. Use common sense, relax, and you will be fine.
Realize that it takes a certain amount of computer savvy to "break" into your computer. Those who have this skill don't care about what is on your computer. In 18 years I have never seen a customer who has had their computer "broken into." I hear people worry about viruses that monitor your keystrokes. Those viruses exist, but that is what your antivirus is for. It is so much easier to just steal your garbage for you credit card number, or trick you into giving it away by spoofing one of the websites you trust (see letter "c." above).
The best way to put this is to say that scammers prefer quick, passive types of scams. They call you or you call them and they scare you into buying fake security and they are gone with $50-$500 from your credit card, that you can easily get back from your credit card company for the people who know it is a scam. (It ALWAYS IS btw.) Elaborate, Hollywood thriller attacks on your identity where you are brought to your knees and lose tens or hundreds of thousands take A LOT of effort and rarely bring a return. So they just don’t make much sense.
They are selling a new kind of fear lately that your computer will be broken into on public networks like coffee shops etc. This is possible, but it just doesn't happen much that way in the U.S. There is not really much of interest on the average computer, nor motivation to commit that kind of theft. There are easier ways. Just having your firewall turned on, a password to get into your computer, and a good anti-virus is really all you need to worry about. If you actually have sensitive information on your computer like top secret files or naked pictures of yourself, then you only need to install a program that allows you to password lock files and folders. But again, nobody really cares what is on your computer. I wish I could say coffee shops were more full of intrigue.
A note on passwords, they are a pain in the butt for everyone. You may want to keep a single file on your computer or a piece of paper where you keep track of all your passwords. I think letting Google Chrome save your passwords is fine as long as you enable 2-step verification on your account and don’t use a lot of public computers. Password managers like RoboForm are fine, just be sure to pick a reputable one that you pay for. If there is anyone in your personal life who may remotely want to snoop on you and has access to your computer you may want to change your important passwords (Facebook, email) every 6 months just for good measure. The only people who care enough to try and steal your passwords are lovers, ex-lovers, siblings or parents, also pathological girlfriends who start to dress, talk and take on the exact hair style and personality of their best friend until the boyfriend can't tell them apart in a dark bedroom. ;-)