29 YO, high income in HCOL, help me optimize

[januarian]

Hello fellow mustache brigade!

I’m very new here and relatively new to the FIRE movement, although luckily I haven’t totally been frittering away my finances in ignorance since the beginning of my working career. I’d really appreciate a second (or third, or tenth) look at my financial picture as I’m basically 100% self-taught and really just starting to get serious about taking control of my own finances. I’m in pretty good shape (I think) for someone my age (29), which in a way just makes me put more pressure on myself to optimize because I don’t really have an excuse to not execute ;)

Income: $120,000 + ~$75,000/yr in restricted stock awards from my employer (a private tech company- not able to be liquidated except in company buyback opportunities which occur roughly 2x/yr).

Assets:
401k: $96K in VFFVX (Vanguard target retirement 2055) [Fidelity]. This is about 60/40 Roth/Traditional. I’m maxing it out, but no company match available :(
Taxable brokerage: $11K in FZROX [Fidelity]
Employer Stock: $140K (these are vested RSUs and it's a private company; not able to be publicly traded)
Cash: $20K, split between checking and a high-interest savings acct [Ally, 2.08%]
Car:I also own (paid off) a 2018 Tesla Model 3 (I know, I know). Blue book (and Craigslist comparables) hovering around $45-50K.

Liabilities
None! I use a lot of credit cards for points but pay off in full every month.

Currently renting in a HCOL area (Los Angeles). I’m here for this specific job, so I’m not interested in moving until I’m over it.

I have definitely been somewhat spendy in the past although always in the black every month and paying off cards in full etc; I’m lucky that I’ve had a Mint account linked up to all my cards/accounts for the past 7 years although it’s painful to look at some of the trends (average of $417/month on “shopping”?!?!?!) but for the purposes of this case study I’m not going to go into my specific spending or look for advice on how to cut back there because I’ve “seen the light” recently and want to give it a shot myself before looking for input just yet. I’m more interested in advice on how to optimize what to do with my savings and investments at this point. But for reference, my rent is $1600 ($2650 really, but my fiance pays $1k) and my other biggest recurring monthly expense is $230 for car insurance which sucks but given that I have essentially zero maintenance or fuel costs, it’s not as bad as it could be. Savings rate currently fluctuates between 25-40% per month (this is the year of out-of-town family weddings...).

I haven’t decided on a firm FIRE goal as I’m still pretty engaged in my career and on a good trajectory so I want to see where this goes in the next couple years while still diligently preparing my F off fund in case I burn out (which is a real possibility given the pretty intense company culture and my lack of fundamental desire to be an engineer forever).

I’m getting married sometime in the next couple years. My future spouse has a small amount of student loan debt (<$15K) and maybe $20K in 401k savings, but not much else by way of assets or liabilities. He makes $75K a year and I’m slowly influencing him to up his savings rate. I’m likely going to be the primary breadwinner for the foreseeable future. We have mostly separate finances and will probably keep it that way at least for now. We split the rent proportional to income. (edit: to clarify, my comment about being the primary breadwinner relates to my partner's career goals (starting a business, possibly going back to school, etc) which will probably reduce/destabilize his income for a period of time in the near future and is not intended to disparage his substantial income).

Questions

• Are there any other simple tax optimization actions I can take since I’m living in a high-tax state on a high income? I don’t think there’s any real benefit to opening an IRA because my income negates any tax advantages, but correct me if I’m wrong.
• I have the opportunity to participate in an employee stock purchase plan at a pretty crazy 15% discount, but I’ve been refraining because a very significant portion of my net worth is already tied up in stock from my employer. For perspective, though, the share price has been steadily increasing and has more than doubled in the past 3 years and the company is somewhat of a media darling with a very real and technologically advanced physical product (this is no Snapchat) so sometimes I wonder if this is the right choice. I’ve been taking the money I would have put in the ESPP and buying FZROX in my taxable brokerage instead; am I making a mistake by forgoing likely 15% (minimum) returns (minus taxes) in the interest of diversification? For reference, the way the program works is you contribute via payroll deduction for 6 months and then on the purchase date that money gets converted to shares at a 15% discount off the current FMV.
• I have heard tell that Fidelity may charge fees for investing in Vanguard funds through their brokerage services, but I wasn’t able to find anything in my 401k plan (administered through Fidelity) paperwork or statements indicating that I’m paying fees other than the 0.12% annual administrative fee. I put my 401k through a fee analyzer and it’s very low fee. Am I missing something here?
• I’m OK with the risk associated with high equity exposure; should I diversify outside of FZROX in my taxable brokerage?
  
• I have been casually mulling over the idea of buying a multi-family rental property in the Midwest near where my family lives- it’s a solid rental market where I could easily pay under $150K for a duplex or four-plex and still meet the 1% rule. Is this a good idea, and would it make my life a lot more complicated given that I’m a CA resident that lives thousands of miles away? There’s a good chance I could rent to extended family and get some property management help as well. I’m hesitant because I am very “free” and flexible right now and owning property puts a damper on that, but if it could help me from a tax perspective and if I could get the right support system in place via family, it could be good.
• Is it worth it to try to influence my fiance to max out a Roth IRA until we actually get married since we’ll probably be unable to contribute after we are married because of income cap? I have convinced him to steadily increase his percentage contribution to his 401k to get closer to maxing it out in the meantime (he’s at 11% currently, plus 5% match) but traditional contributions.
• Does anybody have any advice or opinions on cutting car insurance costs? I have an OK driving record (no tickets but 1 claim due to backing into an Uber driver who was objectively parked like an idiot), but my insurance more than doubled when I bought this car. I’m with State Farm and have been for my entire driver history. The cost is basically evenly split between collision/comprehensive & liability (100/300/100). My thought is that I am appropriately insured for my assets & for the value of the car, but I’d welcome a second opinion on that. I’ve gotten a couple other quotes and they are all even more expensive which seems so ridiculous.
• I’m an engineer, an analytical nerd, and an optimizer (but I don’t like making things unnecessarily complicated); does anybody have any suggestions for continuing to develop my financial/tax management savvy? I’ve read YMOYL, The Millionaire Next Door, A Random Walk down Wall Street, and the Bogleheads guide book in the past 2 months or so which have all been great and helped to solidify my understanding and commitment to FI concepts; any additional recommended reading? Or, especially, anything I can do other than read books and blogs obsessively to grow my savvy? :)

Thanks in advance everyone!!

[former player]

As you know, you are in excellent financial shape.

A couple of thoughts on your questions -

4.  You are already highly exposed to risky equities through your employer stock, at just over half your investment and cash assets.  You are the one who is best placed to judge whether or not to cash those out and either put them into more index stocks or choose some other risky equity investment.

5.  You are currently footloose and fancy free in your assets, which seems like a good idea given that your personal situation (future marriage in mind), employment situation (a job you can see yourself being "over" at some point) and place of residence (you are in LA only for the job) are all fluid.  I don't see that there are sufficient financial advantages for you in buying property at the moment.  Perhaps bookmark this as something to reconsider in a couple of years' time?

One other point.  If I were an independent adult earning $75k a year but my partner described themselves as the "primary breadwinner" I'd be pretty pissed.  Yes, you are earning more, but that does not make you the primary breadwinner - you each earn your own bread, and your extra is just gravy.

[Viking Thor]

If possible I would purchase the max amount of stock at 15% discount and then sell it when allowed, assuming it can be liquidated at a reasonable timeframe (at least yearly).

It's a guaranteed return of 15% plus or minus whatever the actual return is, that seems like a good deal as long as you don't get overextended with too much of your net worth at the employer.

You are actually much more invested now in one stock than is ideal. So most would say to sell the company position and diversify. I.e keep accumulating and selling when it vests / eligible to sell.

Of course this is bad advice if your company is the next Google but in most cases diversification is better to reduce risk.

[januarian]

One other point.  If I were an independent adult earning $75k a year but my partner described themselves as the "primary breadwinner" I'd be pretty pissed.  Yes, you are earning more, but that does not make you the primary breadwinner - you each earn your own bread, and your extra is just gravy.

You're right that this came off as flippant- thanks for keeping me honest. I didn't clarify this in my post, but my partner is interested in potentially going back to school, starting a business, or pursuing his passion in an alternative industry as his next career move, so in the interest of conservatism when planning my financial moves I don't really consider his income at all and try to plan for supporting both of us on just my income. I'm also a very independent person so I'm still slowly easing into the prospect of marriage and combining lives (for context: we got engaged like 8 months ago and haven't picked a wedding date, and we dated for 5.5 years before that!) I added a clarifying comment to my original post.

[Ben Kurtz]

Look up the "backdoor" Roth IRA technique.

Participate in the ESPP to take advantage of the discount, but then liquidate diligently at each semi-annual liquidity window.  And diversify out of your vested RSUs to the extent you can under the program rules.  You are not Mark Zuckerberg.  You don't run the company.  Don't let so much of your net worth be locked up with one management team if you can at all help it, especially if you are not on that management team.  Plus your day to day paycheck is bound up with this company.  Think "Enron."  Most institutional fiduciaries have house rules against portfolio concentration for trust and managed accounts -- no more than 25% of such an account invested in any one issuer is common.  That's an absolute minimum standard for avoiding flagrant investing malpractice. 

About your car: You don't have to run out and do this tomorrow because you don't have a hair-on-fire debt emergency, but over the next few months you really should think about selling that Tesla and buying something far more modest.  Showy "sex cars" (that's what my wife calls them) are for millionaires and middle aged men with inadequacy complexes.  Unitl you have a million dollars in net worth, your automotive fleet shouldn't exceed $10,000 in gross value -- that's my rule of thumb.  I love beaters.  You don't have to love them as much as I do, but you should get comfortable driving around in a somewhat older Ford or Subaru or Prius until you are objectively rich.  The Tesla probably depreciates a bit more slowly than most, and saves you a bit on gas, but you can see what it's done to your insurance bill, and $40,000 more in diversified investments will probably do you a lot more good over the long term.

To some extent the car is a philosophical and emotional question -- you live in Los Angeles, where personal self-worth and car is far more culturally bound up than in other places; the Tesla is honestly a really neat car; and you have the income and financial resources to do quite well financially without having to fully optimize the car situation.  But optimizing it will give you a real boost, so I push for it.

Real Estate: My suggestion would be to avoid rushing into a long-distance absentee landlord situation.  The rent-vs-buy calculation in Los Angeles is generally skewed quite against buying, so you probably aren't a good candidate for my usual rule of thumb which is your first residential property should be the one you live in.  Max out the backdoor Roth and keep stashing away savings in index funds -- that, plus wedding planning, should keep you busy enough for the next couple of years.

Asset Allocation: Your taxable account isn't very big right now, relative to your cash savings, but once it gets nearer the $75,000 or $100,000 mark you should start to think about at least a moderate allocation to bonds.  You haven't lived through a real, extended stock market calamity (I mean, yes, you were alive in 2007-09, but it doesn't sound like you had much invested in the market then). I recall phoning my broker when the market was particularly low back in early 2009 (yes, I'm old school and I had a live human broker to talk to) and saying something like "I feel like now is a good time to invest in stocks, don't you?" and getting a response to the effect of "Well, some people think that right now, but they are very much in the minority." I put all my free cash into DJIA and NASDAQ index funds.  They went down at first (my market timing is not perfect, duh), but over the long term, well, you know...  So I consider myself pretty ballsy, but I still have a 20% - 25% bond allocation in my investment plan, and I rebalance regularly.  Even if you have nerves of steel you should still have at least some allocation to bonds.

Think about your long-term plans, update your case study next month when you have spending figures you can be proud of, and we'll throw a few more brickbats your way.