$250k a year + private school shouldn't cause people to go paycheck to paycheck.
Even in CA, $250k a year ... let's do some math. Married filing jointly, maximum 401k contributions. Two kids, each going to private school. Let's say that's $30k a year cash (which is on the far upper end of private school costs in the bay area -
source.)
http://www.taxformcalculator.com/ tells me that after $36k of 401k contributions, take-home pay is $145.5k for the family. After private schools, that's still $85.5k. That includes federal and state taxes.
The only problem is that a
house in the same area - well, a 30-year mortgage for $1.5m at today's 3.9% is 7k a month, which is a cool $84k a year. Yeah, that'd be paycheck to paycheck, eh?
I'm a pretty big believer in education... so if I had to make the choice, I'd go for a smaller house. I'd also not bother with private school until teenage years, because it tends to be fairly useless for little kids, unless you really don't want them hanging out with The Poors. And of course, there are plenty of decent private schools even here for closer to half the price. All of that would give a lot more breathing room.
Really though, shit like this is why people think that $250k in the bay area ain't much. It ain't much if you want
everything that other people seem to have: nice house, nice cars, private schools, vacations, stuff, travel. You gotta pick. And save when you don't yet have those things. And go for slightly cheaper versions of those things. As soon as you go just slightly less nice, prices fall rapidly.