We live in a pretty moderate COL area, but it is increasing.
We don't have a mortgage now, but I stayed home when we did, at one point even covering two mortgages until we sold our old house. It was very, very tight, but we managed. For a while I did a little bit of babysitting at home, which covered maybe 2/3 of our grocery costs and so saved us a decent chunk of money there. I would like to do that again, but we need to get the house back in order after moving and take care of the poison ivy in the back yard before we do that.
Ultimately, how we did it is: We lived Very Frugally. Frugal to the point that most people thought we were flat out crazy. We minimized driving and travelling. We radically simplified our eating. We didn't pay for entertainment, ever. At that time we had limited local calling, no cell phones, and dialup internet. We looked for things we wanted in free places first, and then the thrift stores, and if it wasn't available, we waited until it was. I kept an eye on the thrift store so I could buy a head for the children's clothing, so that we didn't hit a point where we suddenly needed certain items and sizes and had to buy them new because they didn't happen to be in stock in thrift stores at just that moment. We homeschool using a state cyberschool, so curric. is free, we have a school computer for the kids, and partially subsidized internet. We make do with annoyances until we have the money to fix them, rather than go into debt to deal with them. If push comes to shove, we may let one of our cars sit in the drive way until we have the money to pay for inspection (at the end of this month, unless dh gets a job, I will be vanless. *sigh*. But only temporarily).
Like a previous poster said, we base our lifestyle on whatever dh's income is at the moment. And if his income increases, we still carefully limit ourselves so that if there is a loss of income later on, we will have savings and not have difficulty "shifting down" to accomodate that.