The "easy wins" that jump out to me are:
Cell phone is way too high. Convert both to a prepaid or low cost plan from an MVNO. Depends on who your provider is as you'll want to bring your existing devices if possible, but you should be able to more than cut this bill in half-- $30-40 a person MAX for a very good smartphone plan from a decent MVNO (Ting for Sprint device, Airvoice for GSM/AT&T/T-Mobile, etc.)
Even if we accept that two cars are necessary (you haven't told us much about the commute-- is your spouse biking to work yet?) gas is too high because you're using the Highlander. Remember, it's never too late to dump the gas guzzler. Sell the Highlander for ~8-9K on Craigslist, take a month's leftover pay if necessary, and get into a fuel efficient compact from MMM's list. The Matrix looks like a great option if you like the storage of your SUV. This will immediately bring the gas costs down, and you may be able to manage to get the amount from the Highlander that you spend on the replacement, costing you a net of 0, if you work hard enough at it.
Groceries could probably be a fair amount better too. Are you buying pure raw materials (flour, butter, milk, eggs, cheese, meat, produce etc.) and no processed or prepared foods? If not, there is still margin to improve here.
What is the status of your emergency fund? If it's just in savings, you could probably be managing it better. Why not put the emergency fund in a low to moderate risk investment vehicle, and get a home equity line of credit that you keep at 0 instead? That way the emergency fund is making you money, is accessible, but you could also make the choice to capitalize on the equity rather than your investments in case of a minor to moderate emergency. you need to get the money you have into some sort of investment vehicle, stat, or it's actually diminishing due to inflation.
Income is obviously another problem. How old are the kids? Could they go to a relative's house or daycare for just a *couple* days a week, allowing you to take on part time work (TH-F daycare, Saturday Sunday with the spouse, allowing you to work up to 4 days per week)? When will the kids all be in school? I would be working tirelessly to find some means of making income yourself, no matter how trivial at first. This will improve your situation a lot.