One of the first things that jumps out is your rental property brings in $1600, but the property costs you $1598 with mortgage, dues, fees, and repairs. Assuming your tenants are paying all the utilities and you have a tenant every month of every year, you're breaking even on it. Your rental property is not income!
You're paying twice what you should be in groceries. You shouldn't be paying more than $500/month for food with two children. Establish a solid food budget and track what you're buying. What "entertainment" is costing you $250 a month? You're paying for swimming, baseball, "activities," and "entertainment." What's the difference?
What clothes are you buying that costs you $100/month?
How old is your CRV? You can probably cheaper auto insurance especially with a 1999 car.
You're also budgeting $125/month for Christmas. I'm not going to suggest how you take care of your family, but be aware that you're currently budgeted to spend a mortgage payment on Christmas gifts this year and saving for two vacations. A large portion of your monthly expenses are towards your children's activities and vacations, but also be sure you're addressing your own future as well.
As far as retirement savings, if you or your wife receive an employer-matching program you want to max that out, then a tax-advantaged account like a Roth. Remember that the basic math for retirement is your current spending times 25.