Why did Bryan Adam's fingers bleed in the summer of '69?
Because every fricking guitar you can get near has a PAINFULLY HIGH ACTION (height of strings)

Guitars with sweet low actions do exist, but there's already a dude/ette with no biceps playing it 24 hours a day and going without food.
Here's how to lower the action of your own guitar.
It'll feel so good you'll play it instead of eating/bathing/sleeping.
There won't be anything left of you but bad posture and enough hair to comb over your face.

The cheap ones start out too high. Old ones get that way over time from the tension of the strings.
For examples of both kinds, I'll be dropping the action on this Chinese-made "Backpacker guitar" that cost me a penny brand new (plus $24.99 shipping on ebay) and also an original Martin Backpacker.

Step 1: Go Nuts on the Nut

You probably want your strings as low as they can be without buzzing while you play.
That depends a lot on how you play. If you play hard you'll need the strings to be higher or they'll buzz.
If you play slide or bottleneck guitar, you'll want the action higher still.
In fact, if you use the slide all the time, you don't really have to use the frets, and there's no such thing as an action that's too high. Keep that in mind when you get a free guitar with a really bent neck.

Regardless of your situation, the best way is to find a guitar you like playing, and measure the action
If you only have access to the one you're working on, just whittle down the notches in the nut and bridge until you like how low it is. If you wittle too low you can put a drop of superglue in the notch and let it dry. Or put a piece of paper under the string.

If your neck is straight and your fingerboard is flat, you'll be able to put them lower.

Here I am whittling down the nut notch on the penny guitar. You can use a triangular file if you have one.
Play with the string and sight down it. The nut notch should be as deep as if there were another fret there holding up the string. In other words the string height differece between the nut and first fret should be the same as the difference between the first two frets.

Step 2: Take It to the Bridge

Here I am whittling notches in the bridge. I could have sanded down the bottom of the bridge instead, but the manufacturer made a mistake and the strings are too close together. I'm cutting new notches. When I'm done the array of strings will be 2" wide at the bridge.

The second photo shows the bridge after some wittling then playing then whittling...

The heavier strings usually need to be a little higher than the thin ones.

Step 3: Straight - Edge Guitar

If you want to be more precise than just eyeballing, you can find a totally straight bar, such as a a carpenter's level or this extrusion I stole from the bureau of standards.
Lay it on the fingerboard and see where it lines up with the bridge. Then eyeball that.
You could measure it also if you're confident you know how high you want the strings to be at that point.

If removing the saddle completely isn' t enough, you can sand down the bridge a bit.
If that's not enough you have two options: Either do an operation called "re-setting the neck" which is tricky. Or you can call it a "slide guitar" and suddenly a high action is a virtue.

Step 4: Flatten the Fingerboard

Some guitars have a steel rod down the neck that can be adjusted if the neck is bent.
Usually the bolt head end is concealed at the by a little plate at the "carpal-tunnel" point near the tuning pegs.
Neither of these guitars has one and both have pretty straight necks, so look for that truss-rod info elsewhere. We're just going to take a neck that's already pretty straight and flatten the fingerboard a little.

Over time some frets get worn down more than others. Various other mishaps can make the frets uneven. To even out small irregularities put some sandpaper around your flat bar and sand the frets a little bit. You'd rather have the frets be round than flat, so don't sand too much.
And don't worry so much.

Step 5: Lowering a Glued-on Bridge

The Martin has a glued-on style bridge. The white strip that props up the strings is called the "saddle".
It's supposed to just lift out, but it's stuck, probably from years of drool.

Most stuff gets a little softer when you heat it up, so I tried warming it with the heat gun. Not too much, the guitar doesn't need to be scorched. Insert pun here about "scorching licks".

Step 6: And Yank

Sure enough, after some wiggling it pulled right out.
I scraped off some coffee-drool composition and put it back in to draw a reference line.

Step 7: Draw a Reference Line

Draw a line at bridge level on the saddle. That'll make it easier to keep track of how much you're sanding off it.

Step 8: Sand Down the Saddle

Sand it down as far as you think is good. Check it now and then by putting it back in the bridge.
I thought this guitar was high due to age, but according to web see-say, a lot of them came from the factory that way. Apparently Martin also makes saddles of various heights, in case you see white strips of bone rattling around in your guitar case and don't know what they are.

That's it! Re-string your guitar and it's ready to play!

Step 9: Add a Strap

The one penny guitar came with no place to attach a strap. So i drilled an undersized hole and screwed in a brass buttonhead machine screw with the head protruding to tie a strap to.