Investing

How the ‘Starve and Stack’ Strategy Can Help You Hit Your Money Goals Faster

Tim Stobierski

There’s no doubt that having multiple income streams can go a long way toward helping you achieve your financial goals. And while there’s really no bad way to make quick progress, there’s one, work-smarter-not-harder method that can really supercharge your efforts.

Introducing: the Starve and Stack method, courtesy of financial advisor Nick Vail.

What’s that?

Basically, Starve and Stack is a financial strategy you can use when you have two incomes—like a combination of your and your partner’s salaries or if you have a full-time salary, plus side-hustle income—but live off only one. In other words, Income A covers regular household bills and expenses, freeing up all of Income B to put toward a big financial goal, like paying off debt or investing.

Before you get scared off by the name, know that “starve” just means you’re just depriving yourself of some of the comforts a second income could afford—like more dinners out, expensive vacations or new cars—in favor of hitting a big financial milestone sooner. That’s where the “stack” part comes in: You’re literally stacking your benefits over time, thanks to the power of compounding. 

How about an example?

Let’s say Ross and Rachel, a pair of 27-year-old newlyweds, each bring home $40,000 a year after taxes. While they’re young and don’t have kids or a mortgage, they use the Starve and Stack method to build their nest egg.

They follow a strict budget and live solely off Ross’s salary until they turn 30, while investing Rachel’s $40,000 in a diversified portfolio, which earns an 8-percent annual return. Three years later, they’ve banked almost $140,000 (excluding inflation and taxes)—at which point they switch up their strategy in order to save for other priorities. Even if they never invest another cent, they’ll have almost $2.4 million by age 67, assuming an average annual return of 8 percent. That’s a huge payoff for a few years of scraping by.

Alternatively, let’s imagine a more typical scenario, where Ross and Rachel invest just 10 percent, or $8,000, of their combined net income every year from age 27 to 67, and earn the same 8 percent. Despite contributing more to their investment account over the years, they’ll end up with about $150,000 less by retirement time as their money hasn’t had as much time to benefit from compounding returns. 

Can individuals use this strategy, too?

Literally anyone with more than one income stream can put Starve and Stack into action. For example, I’m single and currently have both a full-time job and freelance side hustle. For the past year and a half, I’ve used my full-time salary to cover my expenses and retirement savings, and used my freelance funds to pay down my student loans and invest for medium-term goals.

Before, when I only had one income, I could only afford to make minimum debt payments and contribute minimally to retirement. But since adding an income stream dedicated to my goals, I've invested more than $25,000 and paid off nearly $15,000 of debt—saving me a ton in interest payments at the same time. That progress more than compensates for the “sacrifice” of not burning my second income on purchases that won’t move me closer to my goals.

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All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

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