Step 1: Extract the drive image

After purchasing and downloading the OS X Mountain Lion update and before actually updating your Mac, navigate to your Applications folder in the Finder and right click on the file “Install Mac OS X Mountain Lion.app” and select “Show Package Contents.”  Look in the “Shared Support” folder located under the “Contents” folder of the “Install Mac OS X Mountain Lion.app,” and copy the file named “InstallESD.dmg” to your desktop.  This file is a bootable disk image of OS X with the Mountain Lion Installer already installed.  You will need this file in step three.

Step 2: Erase a USB drive

Take a thumb drive that has at least a 8GB capacity, and connect it to your Mac. Launch the Disk Utility application located in your Application’s Utilities folder.  Once it is running you will see a list of the mounted drives connected to your Mac. Make sure there are no files you need on the drive, then select the USB drive, and click on the Erase tab to the right.  Select Mac OS Extended (Journaled) as the Format, set the Name to “Mac OS X Installer” and click on the Erase button.

Step 3: Restore the drive image

Now select the “Mac OS X Installer” you created in step two, and click on the Restore tab to the right.  You want to set the Source as the ”Mac OS X Installer ESD,” which is located within the “InstallESD.dmg” file you copied in step one.  Then set the Destination to be the “Mac OS X Installer” partition you created in step two.  You can drag and drop the items in the list on the left of the Disk Utility, into their appropriate Source and Destination settings on the right.  If you do not see the “InstallESD.dmg” file listed, use the Image button and locate it on your desktop.  Click on the Restore button once everything is set correctly.

And that’s it.  Once the process is complete, you will have your own backup installer for OS X Mountain Lion that you can use to install on your Mac, or restore it should something go terribly wrong.  When you boot your Mac, be sure that the USB thumb drive is inserted, and hold down the option-key when the Mac starts up.  You will be presented with a list of drives.  Simply select the “Mac OS X Installer” you just created on your USB drive and you will be ready to install OS X Mountain Lion on your Mac.

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