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If you're running Windows, oddly one of the best AV software packages currently available is also completely free. Microsoft Security Essentials catches most of the common and really nasty stuff, and for the more malware (less virus/trojan) type items, you can use Malwarebytes Anti-Malware which is also free. Both are also fairly lightweight compared to other packages available, so won't impact system performance as much. As far as software firewalls go, just don't even bother. If you have any sort of always-on broadband connectivity like cable, DSL, or FiOS, you should be using a hardware firewall.

You can get a relatively inexpensive hardware firewall meant for consumer-grade use for around $50 at Wal-mart or any big-box store from Linksys, D-Link, or Netgear (I wouldn't buy Belkin). If you want something more stout, you can hit up E-bay and find high-quality used equipment between $50-$100 that is enterprise grade or at least SOHO-grade from Cisco, Juniper, and similar manufacturers. I personally use Cisco Pix 506s and Juniper Netscreen 5-GT Elites for several of my clients, and at my folks, grandparents, and my house. Each one set me back less than $100, and includes more advanced features than you get in a consumer-grade product (like being capable of IPv6/Toredo, support for VLANing, Port Security, and QoS tagging) and each one is also capable of handling many more sessions at a higher rate of speed. For most home users with a single computer or two computers, the difference between the average Linksys vs using something heftier won't be noticed, but if you're like me with 20+ systems on your home network, I'd recommend getting something more substantial.

Software firewalls, on the other hand, are completely and totally useless. In many ways, I wouldn't even consider them better than nothing. If you have to use one, the best you're probably going to do as far as protection vs performance-loss of running the software is actually the built-in firewall in Windows or Mac OS X. If you're on Linux, this isn't exactly the same case, but I expect people who use Linux already know about more advance lightweight software firewalls like pf and iptables.