Really Living while on a Budget

I thought that right now, in the beginning of a new year (but not the beginning of a new decade, as a friend of ours pointed out-the new decade does not, in fact, begin until 2011) would be a good time to address the biggest monkey on my back...debt and budgeting.  This is not just a sore spot to me, though, most of my friends and even our country are struggling with these issues.  I know that there are a lot of reasons for this current economic melt down but believe that if we were brought up as a nation to be savers (and conservers and recyclers not to mention critical thinkers) this situation would not have happened.
When I was growing up, I received an allowance from my mom.  I was expected to split it into two envelopes, one for  saving and one for spending money.  By the end of high school, I had a pretty good chunk of change saved up.  However, in the ever amazing wisdom of youth, I spent it all on a car.  Now, I loved that car but it was not the best choice I ever made.
Thanks to the two envelope system I grew up with, I have a never ending need to save.  I love having money in my savings account.  The more I have saved, the better I am able to sleep.
My family, through a few different factors (choice, some poor decisions when we were young(er) and (more) foolish, and some unexpected circumstances) is currently living on a very strict budget.  Luckily, we both have jobs, we are all healthy and have had relatively good luck with our cars.  We have, however, had to make many adjustments to our wallets and more to our minds to be able to move forward with our finances.
The first challenge to our finances came with the birth of our oldest daughter.  We were a two-income family but now had to pay out over $500.00 per week in child care.  We did not adjust our weekly spending habits and quickly found ourselves in a pickle.  We had very little savings and the same expenses did not realize that even with two full time incomes an extra expenditure of $120 per week would hit the bank account so hard.  But we kept on and in time we cut other expenses down and were able to better absorb that daycare expense.  Then we started thinking about having another child.  Then we decided to move to Hawaii from Maine.  Then I dropped down to part-time work (and we worked at different times) so that we wouldn't pay child care any more.  Then we were blessed with a second, un-eventful pregnancy.  Then we moved back to Maine and bought a house.  Then we had our second baby girl.  Now it's been about a year since we bought the house and have two children, two cars and I only work part-time.
And, you know what?  We are for the most part in better shape budget wise than we were with two incomes.  We don't make nearly as much money but we are far more conscious of our money.  Before we spend we ask ourselves a few questions:
1.  Can we get this used? (except for underwear, diapers, basically anything that touches the nether regions)
2.  Is this the best possible deal?  Sometimes this is a really hard one to ask myself because I am generally shopping alone with my two children.  Anyone who shops alone with any children knows that the biggest hassle of a shopping trip is the CHILDREN!  The idea of going to a second shop (which means loading them back into the car for a trip somewhere else and then getting everyone out and re-organized to go into yet another store is a huge hassle).  Generally I research my prices and products online and don't go for it until I'm pretty certain that I can get what I need in one place.
3.  Do we really NEED this?  I admit, this is a hard one for us.  We are fairly impulsive people and have a very hard time differentiating between need and want.  I am also excellent at justifying why I should buy things.  I know this and often have to talk myself out of making purchases while trying to talk myself into making purchases.
4.  If we need this, where the heck are we going to put it?  This is our newest test.  Having two children has shown me that your home will quickly get overrun with stuff.  If I don't have a place to put the item, I do not allow myself to buy it.  As a part of that rule, my husband recently built a wall of shelves in our basement (from floor to ceiling)  We were able to put everything but a few tables and our bikes away on those shelves.  We have now set a limit that we will not store anything down in the basement that does not fit on those shelves.  That means that before we can get any more stuff, we need to purge what we already have.

These steps seem so common sense as I write them but when going through them it is very difficult to be honest with myself about the answers.  However, we have had some really great discussions with Olivia about budgeting, about clearing out trash and toys that aren't used any more and about recycling.  We'll keep with our plan and hopefully our country can find a way to make a realistic budget and get some money in the old savings account!