I really really like the siggie of the poster above me, KyleAnn. That's our motto. You'd be suprised how much you can save simply by using things up completely, wearing them out until you can't anymore, or by doing without. We live pretty frugally without a whole lotta nice extra's. I do have a nice car and dh just got a new truck but they were necessitities that we couldnt' find another way around. A lot of families go to one car(we couldn't) to save money or use public transportation. There's cd'ing(I know you plan on it since I know you from the cd board!), bf'ing, consignment shops for baby equipment(slings, blankets, clothing, etc), and thrift stores for everything you and your dh need. We are impulse buyers. We have recently curbed that by shopping together and making each other wait a week before buying anything to see if we really NEED it or we just want it. We line dry clothing and diapers to save on utilities. We reuse things as much as possible and buy in bulk(only when it's gonna save us money though, watch prices!). We buy off season things that we can't buy used. We do a lot of TP buys. Also, this may or may not help you but not only am I a sahm, but I'm a child care provider. I went through the air force's family child care program to become a provider to make extra money, stay at home iwth my girls, and use the things in the lending library for providers. My baby needed a high chair and we needed a double stroller for the daycare so we waited until I could get them from the lending library instead of buying new or used. They were free! Also, we avoid accumulating a lot of STUFF. We use the library for books and movies instead of buying our own. We dont' buy tons of toys for the kids that they won't end up playing with for long. We don't get tons of clothing because we know we will do fine with less anyway. We just get necessities. I knit and sew so that helps. Also, we always pack lunches or snacks when we go somewhere so that we dont' have to buy while we are out. We buy and make things from scratch most of the time so we can avoid expensive prepared foods. There are a ton of ways to cut back financially so you can stay at home with your kids and it's possible in MOST circumstances but not all. Maybe there's a job you can get that you can work from home(like a newspaper editor or such) or take baby to work with you for a while? Maybe you could babysit or be a nanny or do childcare? Be creative! There's gotta be something you could do!
Check the frugal living board and read the thread about what they all do to save a buck or two. It's pretty inspiring.