Walt Mossberg, the Wall Street Journal's technology writer, came out with his fall personal computer buying guide today. In it he also discusses how to secure your computer so that bad guys don't take it over. He has a real nice set of recommendations to follow. He's not paranoid; people really are out to get him and you.
All of these recommendations might sound over-the-top; however, every year I have students who come to me and tell me how their computer is now unusable and that they're now having to re-install their operating system. This is especially prevalent among students who share a computer (in a fraternity or sorority or just off-campus housing). You should set up the security on these computers tighter than ever because you can't trust the computing habits of all the folks who use them. Some of these programs cost money. Spend the money somehow: get a job, get a loan from mom and dad, share the cost among everyone who uses the computer. But somehow, some way, buy the software and get the automatically updating version so that you won't lose all of your work at the end of the semester when all of your papers are nearly done.
I have ZoneAlarm Pro running at work and home at all times as a firewall to stop both bad guys from getting in and bad guys who have already gotten in from sending information out. Once I installed a router with NAT at home the attacks that got through to my computer dropped by way over 90%. To stop viruses I use VirusScan Enterprise since that's what the UM makes freely available to all of us. This runs at all times and scans my computer every night. To stop spyware I run SpySweeper every night; this software recently has contributed much to my peace of mind while using my computer.
In the "I know I'm going a bit overboard but it actually ended up helping" category, I also downloaded Spybot Search & Destroy and Ad-Aware. Both of these are quite effective and would (I'm guessing) be just as good as SpySweeper and caught a couple things that SpySweeper didn't to begin with. But I'm currently using SpySweeper and am very happy with it.
My mail program is Thunderbird from Mozilla. It has its own built-in spam filter that works quite well and gets better the more that I use it.
The most important thing that you can do, even if you don't do any of the above, is to stop using Internet Explorer and start using Firefox, the browser from Mozilla. It's fantastic, it's safe, it's easy to switch to. I've even gotten my wife and my mom and dad to switch to Firefox; they were able to do it without a problem. It automatically brings over your bookmarks and whatever else you want from IE. Don't hesitate; do it now; make the switch.