Windows Live Mail 2012 (the latest version) comes with a built-in spell-checker: as soon as you start composing a message, any word perceived as misspelled will be highlighted with a red, wavy underline, just like on the screenshot. If you've ever used a Microsoft Office program, you'll feel right at home with this approach! Just right-click on the misspelled word to either correct it, or add it to your custom dictionary so that it is no longer flagged as a misspelling. Even better, Windows Live Mail can prevent you from sending an email that contains (potential) mistakes, as you'll learn in this tutorial!
Let's take the example from the first screenshot: you mistyped or misspelled a word - what now? Either manually correct it, if it's faster, or right-click on it.
Windows Live Mail will display a context menu that includes a list of properly spelled words which it thinks you meant to type. If one of them is the one you wanted, click on it and it will be automatically replaced in the message body. Surprisingly, it didn't guess that I meant to type "misspelled"! Once you've made a valid correction, the wavy underline will go away. 
Tip: Google has become really good at spell-checking queries. If Windows Live Mail's built-in dictionary doesn't recognize a word, type it in Google. Most often, you'll get a corrected version ("Did you mean...") If Google didn't suggest the correct spelling, you can give it a hint by typing the "define:" operator right before that word. This instructs the search engine to give you a dictionary definition for that word, and will always correct its spelling if no match is found!
Windows Live Mail comes a list of words that it knows are correctly spelled. But it also understands that your industry (or you and your friends!) might use some sort of jargon whose words will look like mistakes. For this reason, you have a "custom dictionary" file, to which Windows Live Mail lets you add any word you want. From that point on, words you added will no longer be flagged as misspelled. Just right-click on the word that it thinks is misspelled, and choose "Add to dictionary".
Note: to make Windows Live Mail stop marking a word as misspelled just for this message (without adding the word to your dictionary), just right-click on it and choose "Ignore once" (this instance only) or "Ignore all" (all occurrences).
To avoid embarrassment, you can make Windows Live Mail automatically check the spelling of your emails before you send them. When that setting is turned on, you won't be able to send a misspelled message by accident. But you'll still be able to send.
Click on the Windows Live Mail menu (top left corner), select the "Options" submenu, and click on Mail on the right. When the Options dialog opens, pick the Spelling tab. Check the first checkbox, "Always check spelling before sending", and click OK to save. The next time you try to save a message that contains (perceived) misspellings, the spell-checker popup will open. If you close it, you'll see the following warning: "The spell check on this document was halted. Do you want to send anyway?" Clicking Yes or hitting Enter will send the email; clicking No will abort: 
We'll cover some other options in later tutorials, but notice that Windows Live Mail's spell-checker includes quite a few settings. Most of them are self-explanatory, like ignoring words in uppercase (ideal for industry acronyms), installing foreign language dictionaries, etc.
Another useful option I'd like to point out in the first group at the top is the "Check my spelling as I type" checkbox. If you don't like to see Windows Live Mail check your spelling by default, uncheck that checkbox to turn on your spell-checker. You can still check your spelling manually by clicking on the Spelling button: it's in the ribbon, on the right, under the Message tab. To be even faster, you can hit the F7 keyboard shortcut: 