Five Money Mistakes College Grads Should Avoid

As college graduation parties wind down and reality starts to set in that college is over, former students will face major changes as they transition into the work world.

While recent grads may not completely feel like an adult just yet, there are modifications every student must make after receiving that diploma.

A recent study from FinAid.org and Fastweb.com shows that 1.7 million students graduated this spring with an average of about $23,000 in student loan debt. Add to that a whirlwind of new jobs, paying rent, and budgeting for things like food (no more dining halls) and it's hard for recent grads to keep track of their finances, start a savings plan and maintain a credit card.

However, more than 50% of respondents of a recent Capital One Financial Corporation survey of college seniors planning to graduate this spring and recent college graduates believe they are "highly" or "very" knowledgeable about personal finance and money management. With that said, many admitted to impulse buying and overlooking opportunities to improve their finances with 36% not setting aside money for savings on a regular basis.

While entering the real world is overwhelming, its not impossible. We checked in with personal finance experts to see the common mistakes that recent graduates make and how to avoid them in the first place.

Mistake No.1: Not financially adjusting to your new lifestyle

Being out in the real world for the first time can be a shock to students bank accounts. With no more bank of mom and dad to turn to and included college amenities, many find that they have to significantly change their lifestyle habits.

So many college campuses these days are so luxurious with athletic facilities and student centers, says Manisha Thakor, personal finance expert and author of On My Own Two Feet. Students actually need to be prepared to take a step down before they step up.

Mike Kelly, author of the Financial Advice for the New High School Graduate, advises students asses their financial situation: calculate student loan debt, along with income, rent and other spending.

When they first get out there, they dont realize all of the debt that they really have with their college, they dont really know their income, they dont understand taxes and the role taxes play.

Kelly also suggests grads keep their expenses as low as possible; track all spending, live with a roommate (or three) and build an emergency fund (even a couple hundred dollars can make a difference).

Mistake No. 2: Being careless with your credit

Recent grads tend to put everyday expenses on credit cards, which is not a good idea, according to Laura Adams, author of Money Girls Smart Moves to Grow Rich. They really dont have the experience yet to know how dangerous credit card debt can be.

It can start pretty innocentlyjust putting a few things here and there, says Adams. Then when they dont pay those credit card bills off in full, it just starts to accumulate just like a snowball that keeps going and going.

Students should only put bigger purchases (that they can afford) on credit cards and pay for everyday charges like meals with cash or a debit card.

By accumulating credit card debt early, young adults will spend several years working to climb out of the hole and repairing their credit score to make purchases like a home or car.

Mistake No. 3: Not taking advantage of having time on your side

Loaded down with rent checks, groceries and utility bills and student loan payments, students might find it hard to find any money left over to put into savings.

If you start saving $5,000 a year at age 25 and earn 7% in interest, youll have a $1 million by the time you hit retirement, says Thakor. If you wait until age 45, which is the time most people start thinking about it, you have roughly $200,000. You get five times more money by starting in your 20s and thats a message that people dont hear until theyre in their 40s.

Once students get into the habit of putting money away, they will likely gain incentive to put away more as their stash grows. And it doesnt have to be a lot of moneythe experts suggest starting out small by putting aside $5 a week.

Most [grads] dont have that expendable income to really set aside a significant amount, says personal finance expert Erica Sandberg. Its typical human nature where youre 22 or 23 years old and its just not at the forefront of your mind.

Mistake No. 4: Not taking advantage of employers retirement plans

Yes, its hard to start planning for an event that is at least four decades away, but by creating a retirement fund early, even a small amount can add up to a lot in the long run.

One of the big mistakes I see is that recent graduates do not opt into their employers retirement accounts as early as they could, says Adams. As soon as youre eligible for that 401k [or] whatever is offered at work, you should opt in immediately.

Taking advantage of an employer retirement vehicle as a part of your benefits package early in life can make a comfortable retirement a more attainable goal.

Even if you can put aside a little bit, even $50 each month in your 401(k), that will really start to take off, says Adams. With time on your side and compounding interest, a graduate that starts early can easily have over a million dollars by the time theyre ready to retire.

The experts suggest working grads check to see if their employer has a 401(k) matching program and if it does, take full advantage.

Mistake No. 5 Not speaking up about your salary and benefits

Recent graduates may just be grateful to even have a job in a tough job market, so asking for more money can seem like an intimidating prospect.

When you dont [negotiate your salary] and if you let a lot of time go by, you leave a lot of money on the table for your entire career, says Adams. Each job you take, theyre going to look at what was your salary in the previous job and kind of base their offer to you based on what you were making before.

Students should tread carefully in the way that they ask so as not to come off as demanding.

Adams suggests that to avoid feeling uncomfortable or bringing up salary at an inappropriate time, grads can wait until their first annual review to approach the issue.

Thats a great time to toot your own horn and say look at what Ive done and Im really pleased at what Ive done. If you [as the employer] are pleased as well, could you consider giving me X amount of raise or any kind of bump up in benefits? says Adams.

Its always worth asking for.