  A simple variation of the Lanczos method is discussed. The new technique is
based on a systematic reduction of the size of the Hilbert space of the model
under consideration. As an example, the two dimensional ${\rm t-J_z}$ model of
strongly correlated electrons is studied. Accurate results for the ground state
energy can be obtained on clusters of up to 50 sites, which are unreachable by
conventional Lanczos approaches. In particular, the energy of one and two holes
is analyzed as a function of ${\rm J_z/t}$. In the bulk limit, it is shown that
a finite coupling ${\rm J_z/t ]_c} \sim 0.18$ is necessary to induce
``binding'' of holes in the model. It is argued that this result implies that
the two dimensional ${\rm t-J}$ model phase separates only for couplings larger
than a $finite$ critical value.
