we've been through a similar situation but 10 years later have now adjusted to living on $100k less a year than we were making when the two of us were both working.... we were down to making zero a year when the hubby lost his job too, with a $1550 dollar a month mortgage payment and $700 a month for our COBRA payment for health care...learned all about cutting back, consolidating, down sizing, no more vacations to the Caribbean or Hawaii, no more eating out like we once did, no more going to the movies, no more new clothes on a whim....you name it, we eventually had to cut it out of our lives....just to survive....but then we made some good moves...we sold our home in Mass at a profit, left expensive Massachusetts, bought a smaller home in Maine on the beautiful coast with the profit from the sale of our home in Mass, owned both cars outright and kept them for 12 years each, so we had a long time with no car payments, hubby took a job in Maine making half what he was making in Massachusetts, primarily for the health care coverage and I started a small internet business to supplement his income.... we are getting 'by' better than we did when it first all happened and truly became aware of how much we wasted of our money when we both had good jobs! Some great changes had to be made, but we are so much happier now with our simpler life in this beautiful region, than what it was like when we both had good jobs and were part of the rat race....it took some struggling periods to truly wake us up to the struggles 'the poor'/'the jobless' go through....we were lucky to be able to buy this home outright or we would still be struggling with what Matt had to settle for in the job arena if it were not for us owning our home.... sigh....
Sit down with your wife and consider what moves you can make that don't necessarily rely on you finding a good job again.... I know that may be hard to swallow, but it probably won't get easier until you make some MAJOR changes, like selling your home and down sizing.... and moving to an area with lower cost of living.
We were never able to have kids, so it was easier for us.