Suggestions on how I can afford a child on a budget?

My husband and I recently found out I'm expecting, and he FREAKED out because of financial reasons. As of right now, we're actually in no serious financial debt. We both have stable income jobs (He's in the Navy, I work with Mortgage loans) but the issue is, about 2 months after the baby will be born, he's actually discharging from the Navy. I will still be on maternity leave at that time as well. So we're a bit baffled as to how we can afford to live and support a child during that point in our lives.

We're currently stationed in San Diego, but my mom owns a house in Virginia and plans on giving it to us for only $350 a month. I was thinking of maybe selling my new car if we decide to move back to Virginia, since driving with a newborn sounds like a nightmare. And I figured maybe I could ask a few people I've met for their hand-me-downs from their children. I was wondering how your family may have budgeted during this time? It's a bit different for us, since at some point we'll both be out of work:/

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