Thinking About Launching Your Next Career? Change Can Be Costly

From the Wall Street Journal |April 25, 2010

Dean Soto of Buena Park, Calif., was working in the aerospace field
as an IT security specialist when his wife became pregnant with their
second child and decided to stop working. The family experienced a
significant loss of income. Mr. Soto, 29, decided to look for a
better-paying job.

"At first I thought I could get another job in my field," he says.
"But after interviewing, it was clear that there wasn't enough market
demand, and my skill set was too specialized to justify the salary that I
was seeking."

While still employed, Mr. Soto launched his own IT consulting
company, called Pro Sulum, so that he would have more control over his
income. But after several months, his income from the business was only
$350. Realizing that he wouldn't be able to complete his transition if
he didn't make more money soon, Mr. Soto started investing in courses on
launching a small business.

One such course was Earn$1K (earn1k.com), an online class featuring a
step-by-step process for turning skills into side income, determining
pricing, marketing your services, and integrating a new business into
your life. Earn$1K aims to provide "an understanding of the skills that
can earn you money, and the skills that will never make you a dime,"
says Ramit Sethi, the creator of Earn $1K and the author of the blog and
book "I Will Teach You to Be Rich."

Many people are convinced they can't afford to make a career change,
but there are several strategies to make it a financial reality. Testing
a new job on the side and following Mr. Sethi's advice to become more
profitable are two.

Creating a cushion of savings is another. "When you change careers,
you may be out of work for a while, your income may drop, or you may
encounter unexpected expenses," says J.D. Roth, author of "Your Money:
The Missing Manual." "An emergency fund that covers six months to a year
of expenses will smooth the transition."

Obviously, creating such a reserve will require reducing your
household expenses. If you've never created an inventory of what you're
currently spending, now's the time. Build a spreadsheet on your computer
to keep track of where your money is going on a daily basis. You'll see
patterns of unnecessary spending (your morning Starbucks run, sushi
takeout, etc.) and areas where you can tighten your belt. "These changes
don't have to be permanent," says Mr. Roth. "They just have to last as
you prepare to switch careers."

Also, keep an eye on your debt. Don't finance anything, save just one
credit card for emergencies and cut up the rest, and halt any recurring
payments such as a gym membership or an online gaming account. Call
each financial institution where you have debt and try to negotiate a
lower interest rate.

Finally, consider enlisting the services of a financial planner who
can help you manage your money and plan for your career change. You can
search for advisers by specialty or geography at the Financial Planning
Association's Web site (fpanet.org), and then verify their credentials with
the Certified Financial Planner Board of Standards (cfp.net).

Write to Alexandra Levit at reinvent@wsj.com