Advertiser Disclosure

Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. does not include all banks, credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, Chase, U.S. Bank, and Barclaycard, among others.


Dig Deeper


Become a Money Crasher!
Join our community.

How to Set Up a Home Network – Equipment & Networking Basics Guide

Remember the first telephones? Well, you probably don’t remember actually using them, but I’m sure you know from history books how they worked: A central hub of operators would sit in one room, and a person would use their home phone to call up the central hub and tell them who they would like to be connected to.  The operator would then patch the call through.

Thanks to modern technology, not only do our phones do all the connecting themselves, but all of our other electronic devices can “talk” to each other when they’re linked up through a central hub. This hub is known as a network, and you can create one to link together all of your electronic gadgets at home in a few simple steps.

First, let’s look at what home networks can do – and more importantly, how they can save you money. Then we’ll discuss the different components that go into creating a home network yourself.

What Is a Home Computer Network?

A home data network is an electronic communications system linking all of your devices to the Internet and to each other. A home data network can utilize both wired and wireless technologies, connecting all devices to a central point called a hub or a switch.

In this way, the devices can communicate with each other. For example, computers can access files and printers on other computers, televisions can play movies or other media stored on your computers, and Internet-enabled devices can connect to programs and services outside of your home.

Benefits of Setting Up a Home Network

A home network provides you with time efficiency, organization, accessibility, and cost savings. It allows you to utilize a single Internet connection to power a variety of devices while also allowing those devices to effectively interact with each other.

And in what is a surprise to many people, beyond computers, there are all sorts of devices that can utilize a home network. For example, I currently use my home network for my Voice Over IP (VOIP) telephone system, my home security system, a home media network, and a Network Attached Storage (NAS) device. Other products that can utilize a home data network include digital video recorders (DVRs), Internet-enabled Blu-ray players, video gaming consoles, home automation systems, and networked printers.

And even better, unlike your plumbing or electrical systems, creating a home data network will not require professional help. The essential components are readily available and inexpensive, and can be configured by people with modest computer skills.

Essential Networking Components of a Home Network

1. Internet Modem

Whether you use have Internet service from your cable company or DSL service from your phone company, the Internet modem converts their  raw signal into one that you can use throughout your house.

Just like your fuse box connects your home’s electrical system to the grid, your Internet modem will connect your home network to the rest of the world. With service from your cable company, their coaxial cable connects to your cable modem. In the case of DSL service, their Internet modem connects to your phone line.

Keep in mind that you do not have to rent your Internet modem from your provider. You are free to buy one of your own. Internet modems can be purchased online for $20-$50 and are designed to be user-installed with support from your Internet service provider. For example, pictured right is the Motorola Surfboard SB5101, a popular cable modem that sells for around $50 and is used by many cable providers.

2. Ethernet Hub or Switch

The Ethernet hub or switch is the heart of a network with numerous Ethernet ports so that wired components can gain access to the Internet via the hub or switch. Think of this device like the power strip you use to connect all of your electrical devices; you will need one port for each device you wish to connect.

Once you have acquired a hub or a switch, you merely need to plug it in to the electrical socket and connect the Ethernet cables from the devices on the network. Virtually every computer sold in the past 10 years comes equipped with an Ethernet connection and the cables are so ubiquitous that you can even buy them at The Home Depot.

What’s the difference between a hub and a switch? A switch, sometimes referred to as a “switched hub” has a far more efficient design than a traditional hub because it only routes the necessary data to the device that requests it. I would highly recommend a switch as traditional hubs are now obsolete with very little difference in cost. When purchasing a switch for home use, look for an unmanaged switch. It’s inexpensive and simple to install, unlike a managed switch. I have seen 5-port, unmanaged switches selling for less than $20, so we really are not talking about a major investment here (e.g. TRENDnet 5-Port GREENnet Switch).

While many of your network components will be able to connect wirelessly, there are still some that require the traditional Ethernet connection to your hub or switch. For example, most cable and DSL modems, voice-over IP (VoIP) devices, and desktop computers do not have wireless capabilities built in to them.

3. Wireless Router

Unlike your plumbing and electrical systems, a home data network can be extended to places without a physical connection. To connect your network to devices without running cables, a wireless router is a popular addition to any home network. In fact, a wireless router may have multiple Ethernet ports as well, combining the functionality with that of an Ethernet hub or switch.

Once you plug the wireless router into an electrical socket, you must then configure it though your computer. Configuration is a simple task where you give the router a name and enable password authentication.

Wireless connections do have some disadvantages. A wireless signal may not penetrate all of the areas of your home, and you therefore may need to deal with weak signals in different parts of the house. Also, older wireless systems will not have the capacity to transmit large streams of data such as high-definition television. Finally, wireless networks need to be secured, which requires some additional setup.

Wireless routers start at around $20 with Linksys being one of the best brands (Cisco-Linksys E3000 High-Performance Wireless-N Router shown below). When evaluating routers, the wireless signal will be shown as 802.11 followed by a letter. The higher the letter, the higher the bandwidth (e.g. 802.11n is better than 802.11b).

Wireless Router DeviceOptional Devices to Include in Your Home Network

1. Voice Over IP Telephone (VoIP) Interface

Voice transmissions are just data. A VoIP device connects from your home telephone system, through your home network, to the Internet. The result is that your telephone calls are routed through the Internet by one of the many affordable VoIP providers that can offer service for far less than your telephone company.

Vonage and Lingo are two of the more popular VoIP providers, and cost around $20-25 a month, including a full range of features that would cost much more if provided by a traditional telephone company. Like the router from your Internet service provider, your VoIP router may need to be configured through your computer with the assistance of your VoIP provider.

2. Media Extenders

A media extender is a device that connects to your home network and allows audio and video content to be displayed on your television. The source of this content can be an Internet streaming site, a home media server, or both. Some new Blu-ray players and televisions are pre-equipped to stream content from the Internet.

You will need one media extender per television and they generally cost between $100-200. Media extenders should need little or no configuration once they are connected to your media server through your home data network. For more information, check out this guide on how to set up a home media center.

3. Internet-Enabled Video Game Systems

Gaming systems like the Microsoft Xbox Kinect or the Sony PlayStation can allow you to play against others using an Internet connection. A home network is the ideal way to allow your video game console to access the Internet. Like so many other Internet-enabled devices, configuration is simple once it’s connected to your network with an Ethernet cable. Alternatively, wireless adapters can be purchased.

4. Home Security Systems

Traditional alarm systems contact a central dispatch station through your telephone when your alarm system goes off. Since this is probably the worst possible time to tie up your telephone line, most systems can also route data though the Internet by way of your home network. Some systems will even allow you to monitor and control your home security system through the Internet or through a mobile device. Your home security monitoring service should assist you in configuring your connection to their system. If you want to install video surveillance cameras, these too would transmit their images through a home network that can be viewed on the Internet.

5. Network-Attached Storage (NAS) Devices

The latest addition to my home network is a small box called network-attached storage (NAS). This is a standalone unit that contains several inexpensive, internal hard drives. It offers the advantages of greater capacity and redundancy over the hard drive in my computer. Each drive contains a small copy of the data on the other hard drives in such a way that the failure of any single hard drive does not result in the loss of data. This setup is known as RAID, or a Redundant Array of  Inexpensive Discs.

Combined, this device can hold far more data than any one hard drive can. I use it to securely store all my movies, music, and photographs. I can also use it to back up files from my computer automatically. It connects to my home network just like any other device and the files can be accessed by my computer or my media extenders.

As a separate device, I can also locate it in a more secure part of my house than my computer. Basic NAS devices start at about $150 (e.g. Western Digital My Book Live Home Network Attached Storage Drive), and can be wired or wireless. A well-designed NAS device should be easily configurable by computers though a simple interface.

6. Networked Printers

Traditionally, home printers have attached directly to computers, but many new home printers are network enabled. Both wired and wireless networked printers can be accessed by any computer on the network. Unlike a traditional printer, a particular computer doesn’t have to be present or running in order for other computers to print.

Wired Wireless Networked PrintersFinal Word

Fifteen years ago, my roommate and I ran Ethernet wires between the bedrooms of our house. As the computer nerds we are, we called this our “bedroom area network.” Today, normal people are discovering that they can easily build a home data network in order to link their devices to each other and to the Internet. By following the simple steps above, you too can inexpensively build a home network that will help you be more efficient – and more technologically advanced than your neighbors.

Do you have a home network in place? What were some of the biggest challenges in getting it set up, and what are your favorite uses for the network?

Jason Steele
Jason has been writing about personal finance, travel, and other topics on blogs across the Internet. When he is not writing, he has a career in information technology and is also a commercially rated pilot. Jason lives in Colorado with his wife and young daughter where he enjoys parenting, cycling, and other extreme sports.

What Do You Want To Do
With Your Money?