I think you are correct, financially you need to be working right now. It’s not forever, it’s for now. Your kids are old enough to understand, and I’m sure you and DH have been talking with them about all the changes going on. This can be a learning time for them, and character-building for all of you.
Keep praying, keep listening. I think you are headed in the right direction. The impresion that I got from reading your post is that your friend doesn’t want to lose her daytime “pal”.