Keeping up with the Joneses

I subscribe to a parents group in my area: this parents group does social events, has a classified listing for people to buy/sell stuff, and hosts an online forum for people to pose questions (which range from "where should I take my 2-year-old for fun" to "recommendations for gardeners in the XX area"). Recently, I saw an anonymous posting that I had to forward to my husband because it was so similar to our discussions of late:

"I've been struggling with this question for a while, and now must ask - how do people budget living in the Bay Area. We are a two income household averaging about $300k year pre-tax, with two children in fulltime preschool. We leave work "early" at 5 to pick up the kids, then rush to prepare some form of dinner in about 20 minutes so the kids can eat by 630, then bath and bed. We rent a modest single family home in Palo Alto that could use lots of upgrades. We rarely go on extravagant dinners or date nights, and have dramatically cut down on extraneous spending like clothes and trips. Yet I feel like we are living paycheck to paycheck, which seems completely ridiculous in most other parts of the country given our income. I look around the neighborhood and can't fathom purchasing a $1.5 million fixer upper (most of the homes around us for sale seem really outdated and lacking in modern amenities). Is there something that everyone else is doing that we aren't? Often times I wonder if everyone around us has family money, or just much, much larger salaries? Made out big during the dot.com days? Public kindergarten will help when we reach that stage, but that seems far away. Unless I am totally off base, I feel like we make a decent income for the Silicon Valley, and yet I have no idea why we are struggling. Daycare costs alone are extraordinary, and would be more so if we had a private nanny. Plenty of families here seem to have 2 or more children, and not everyone appears to be an investment banker, so I'm not sure what gives. And this is not a topic one generally broaches with coworkers or friends, hence my anon posting. So how do families manage financially here?"

We've been saying similar things to ourselves about how we both have really well-paying careers (well, I was pretty close to making six-figures myself when I decided to take a step down financially to work part-time and spend more time with my child) and we don't buy too many expensive things and don't travel or eat out much. Our house, which unfortunately, was bought around the peak of the housing market, isn't too extravagant. Yet, we can't even afford to add on to our 2-bedroom, 1 bath house to accomodate our growing family when we know so many people with bigger houses in pricier neighborhoods that have similar types of professional careers that we have. We really don't care to be the richest amongst our friends or to sport the biggest house/most expensive car but what is it that we're not doing when we can't even afford to add on to our house?