Is there a way to anonymize and/or encrypt all of my internet traffic? I am really only concerned about it being so out to at least my cable modem, preferably through it.

I live in an apartment with several people and we all use one cable internet connection through one wireless router (using WPA2) to access the internet. They all depend on me to keep it running. We were having some connectivity/bandwidth issues, and in the process of tracking down the problem I realized that I could use available tools to capture all of their wireless traffic, and in the worst case, I could tap the line from the router to the cable modem to capture all traffic. If I can do it, then that means someone else could, and with the right equipment someone could even tap the cable box outside and grab all my traffic.

I don't mean to be paranoid, but how can I avoid this? I know Tor does this for some applications, but only ones that can be set up to use a proxy, not for all traffic. I had the idea to set up a box between all of my computers and our router, and somehow configure it to redirect all of my traffic through tor, but I do know if this is possible or what tools I need to set up the forwarding. How can I set this up, or what other suggestions/solutions does anyone have?