Edited before posting: I ran through your expenses and gave some strong suggestions, but reading through everyone else's comments, I do really agree with them. Good luck talking to your wife. I know this is hard. Try to word things not as money though. My ex-boyfriend and I had different ideas on spending money. I thought going out to eat was grabbing fast food as a treat occasionally, never getting a drink. He thought going out to eat was a fancy restaurant and dropping $100/meal. Non-money wise, I saw fast food as a thing to enable me to get to the gym easier and eating out as a luxury thing. I don't really like soda or alcohol. He would order it just because. He thought I should hire a cleaner. I thought I should satisfice with cleaning. We fought a lot because our life values just didn't line up. It wasn't about the money spent, but about why it was being spent. Some people think that if you're saving a ton, you're doing fine, no matter how much you're spending. Are you in that camp? Or is this level of spending nauseating you? Have you broken down how much of your $4k in monthly fat is created by you and how much is created by your wife? Is it even? Perhaps splitting finances will help bring those things out and help each of you lower your spending, if that's what you want. Good luck.
It's really hard to imagine a median spend of $10.5k/month for me and my spending is high by Mustachian standards (~$3.2k/month). My gross income is quite high, but not quite $10.5k/month high. Though I guess there are two of you.
I'm going through this and looking at how easily I would slap out a ton of fat from your budget. But, most of the spending here isn't money, but
lifestyle. You and your wife need to decide what you want your lifestyle to look like. Honestly, I would suggest baby steps. Try to improve one budget category each month and see how things go from there. Another suggestion: separate your income and spending. Bonuses go 100% to your stash, not for spending.
I found room for $3,782 of easy to me MONTHLY savings in your spending. And I'm not super Mustachian. (That includes paying off the car.) That means that about 40% of your budget is pure fat and that's ignoring the fact that there really isn't much you can do about your housing cost. That brings it down to "only" $5,928, but is a pretty good start.
Your mortgage + property tax + insurance at $2677 is about 84% of my total monthly budget, for one person. I understand that you guys live in San Jose and I live in Seattle, but that still seems pretty expensive to me.
$900 in cash and ATM spending
My recommendation here is to stop using cash for a few months so that you can track things better. You can't fix this if you don't know where it's going. I only let myself not really know where $100 is going at most. I take cash out of an ATM for specific things (e.g. paying softball guy) and about $60 every couple months otherwise.
Savings: $800/month
$586 on groceries and $443 on restaurants
My groceries budget is $150 and add another $100 for work lunches out and eating out by myself (still working on getting those down myself). Add in max another $100 for social eating out an that's a total of $350/month. I realize that there are two of you and I eat very little food, but your food budget is still 3x mine for 2x the people. What I don't understand here is how you're spending $586 on groceries and then $443 on resturants. Are you including toiletries in your grocery budget? Separate those out - that should make a bit of a difference. But I still don't understand where $586 is going here. You should track that a bit more closely for a bit.
Oh and I found $65 on coffee shops later down. Buy a thing to make coffee at work. It will probably cost you $65 the first month, but will keep costs down later. Or make coffee at home. Even a K-cup thing would save you money here.
My guess is you should be able to cut this down to $350/month on groceries and $100/month on restaurants if you plan things well.
Savings: $644/month
Bills and Utilities $446 [directtv, home phone, cell phones, internet, PG&E, water, trash]
Could you break this down a bit more? Which ones are flat fees? Which ones are controllable?
How much time do you spend watching TV? Could you downgrade to a lower package? I was perfectly happy with Comcast's limited cable plan for $15/month. Not a bad tradeoff to keep cable.
If you have unlimited cell phones, do you really need a home phone? Or could you cut down on your cell phone packages and keep the home phone? Pick one. Being in a contract is not a good reason. The math can often work out in your favour to break the contract if you save enough money monthly.
Without knowing more specifics, you can probably cut this down to $200/month at most.
Savings: $246/month
Gifts $343 [my mothers birthday, mothers day, and a few others fit in here, note this was her purchasing not me, I normally spend very little on gifts. In a fit of rage she declared that I will do all the spending for my family's gifts now. I said great]
My gift to my family is generally time, phone calls, and $50/birthday and Christmas at most. Does your mother really expect $343 worth of presents?
Savings: $343/month
Gas and Fuel $277 [I had yet another month of 100% bike commuting, but trips to the coast are spendy]
Awesome to hear on the bike commuting. What kind of cars do you drive? It might be cheaper to rent a fuel efficient car for a road trip than to drive yours.
Savings: $227/month
Clothing $204 [but they were on sale]
Items of clothing being on sale doesn't mean anything. You need to evaluate whether you need them or not. Try to commit to not spending a penny on new clothing for the rest of 2013. Then allow yourself to spend money when you need to replace something. Stop creating new use cases, wandering into stores for fun, etc.
Savings: $204/month
Maid $180 [2x visit/month]
Learn how to clean your house/apartment yourself. Learn how to be satisficed in how clean the place is. Possible first step: get the maid to only come once a month.
Savings: $180/month
Home Supplies $110 [target]
I understand that this is higher some months than others, but this needs to be understood too. It is so easy to spend extra money than intended at Target.
Savings: $110/month
Gardener $100 [4x month, front and back yards]
Really? If you don't want to garden, then dig up your garden. Gardening should be a relaxing pastime, not for keeping up with the Joneses.
Savings: $100/month
Dry Cleaning $76
What clothes do you own that require dry cleaning? Aren't you a software developer?
Savings: $76/month