In a world where news of security breaches and stolen passwords have become almost daily routine (see news stories on Kickstarter, Yahoo!, Forbes, Comcast), it would seem as though passwords are on their way to becoming obsolete. Until they do, however, we still have to deal with them. The big takeaway? Using the same password on multiple websites and services is a bad idea.
Consider getting a password wallet or password vault application. These apps can make keeping an encrypted collection of different, strong, hard-to-guess passwords easy. The basic idea is that you create one super-strong complex password (or passphrase) to protect your vault. After that, let the program do the heavy lifting and have it suggest complex passwords for all the sites and services you use. When you are at your computer, press a keyboard shortcut to log into your password app and have it automatically sign into your websites for you. The best apps of these kinds have the ability to sync with smartphones and tablets, which means you can keep your secure vault with you wherever you go and have it available on all the devices you use to compute.
My favorite app is 1Password, which is available on Windows, Mac, iPhone, iPad, and Android. It features the ability to sync on a local Wi-Fi network or over the internet using popular cloud solutions. Of course, there are other apps that offer similar solutions, like mSecure or LastPass.
Can these kinds of password vaults keep companies from losing your passwords? No, but they reduce risk by helping you keep all your passwords different from one another. Any of these solutions is better than using the same simple password on multiple sites, just read the news.
The bottom line: do something.
A Video That Explains How 1Password Works
The concepts described in this video apply to other password vault solutions, too.
Updated on March 12, 2014: Added 1Password video section above.