The above book is full of good advice for fiction writers. Dialogue does not mimic real speech, but sounds as if it were real speech.
Contractions Use contractions.
Forget the rules of formal English. You don't speak that way, and neither should your characters. Note however, that if you have an old-fashioned character, you can deliberately have her speak without contractions, to help show her character. These give immediacy to the dialogue, and make it sound more like real speech. Harry, I know that all those years you spent I prison for a crime you didn't commit has hardened you, and I know you now have a special grudge against Lt. Peterson, but you mustn't let it affect your relations with Sandy, even though she did once date him.