My question is more this: If I cash it out I lose $2k right now and get the high interest debt paid. If I don't and pay off the high interest debt over 3 years, I lose maybe $2,500 to interest...so, which one seems more mustachian if the point is to save money?

So I was curious to see how much interest you'd be paying if you go the the recommended way (i.e. cut expenses, continue and increase monthly debt payments).

Someone correct me if I'm calculating this wrong. My method is to figure out what the beginning balance is each month, calculate the monthly interest, subtract payment, use end balance as next month's starting balance, repeat until zero.

The three debts you want to pay off with the 401k are: CC1 @ 9.9%, CC2 @ 19%, and car loan @ 7%.

I assume above quoted rates are APYs. Monthly interest is calculated as (1+ APY)^(1/12) - 1. I round off monthly interest to higher tenth (100th for car) of percentage point to be conservative.

Let's look at the car. Looking at the funny number, I'll assume the car payment is the minimum. Keeping at that rate, you'll pay it off on the 10 month, for a total interest of $74.

CC1, 6000 @ 9.9%. Currently paid at $225/month.

CC2, 4800 @ 19.9%. Currently paid at $50/month. I assume that's because it's not accumulating interest until November.

Suppose you stay with your current debt payment, just juggling the amount to pay the CC2 first, and keeping at minimum with the others. You don't say what the minimum for CC1 is, but let's just say it's $50. So starting November, I switched up the payments for CC1 (to $50) and CC2 ($225).

On the 11th month, you have the amount you had been using for your car payment to add, raising payment to CC2 to $480/month. At this rate, you'll pay it off on month 18, for a total of $752 in interest.

Now you have this extra $480 to throw into CC1, which you'll then be able to finish at month 32 for a total of $1126 interest.

Overall, you'll be debt free in 32 month, having paid a little less than $2k in interest.

That's without cutting expenses.

Throwing in an extra $50/month changes it to 27 months, ~$1750.

Throw in another $50/month, and you'll cut 150 in interest.

Say you cut $200/month, and you'll be debt free in 23 months, and spent only a little over $1300 in interest.

Let's go crazy and cut $500/month. The numbers change to 17 months and $900+.

There's some assumptions I've made in there, and I probably don't get my calculations accurate to the dollar, but I'm sure it's not too far off. Do you see now why everyone here is insisting you'd be making a bad decision to pull out that 401k instead of cutting your expenses?