I grew up in a very walkable small village and walked to school every day, even as most of my classmates were being gifted expensive cars for their 16th birthdays. I went to college in New York City and had no use for a car there, either.
My partner and I own two cars (a sedan and a small pickup), but I still try to drive as little as possible. We moved to our current city because a commuter train line was opening up there that would allow me to ride into work in Washington, DC without having to drive. We're a mere mile from the downtown train station and I try to walk there or bike to the train station four miles away outside the city limits as often as possible.
This year I've been able to keep up my bicycle commute on good-weather days into December for the first time, thanks to some cycling-appropriate cold weather clothing, reflective stickers, multiple lights and a reluctant vote of confidence from my partner for nighttime riding. There's a stretch of my ride home with fairly heavy traffic and a speed limit of 45mph, and that can be pretty intimidating in the dark (daylight, too) but it's worth it to me.
I would personally be content with ditching one of our cars altogether. I'm sure the savings on car insurance and maintenance costs would be a significant boost for our budget. Most of the places I need to get to on a regular basis are within cycling distance in our city, and we've also got a decent local bus system. I personally don't have a problem with riding in bad weather, but my partner doesn't exactly like it so I tend to leave my bike at home when it's gross outside. For her part, she works three miles from our house and I've been trying to convince her to start riding too; she's said she'll consider it more seriously once the weather gets warm.
As for grocery shopping and running errands, I've got two saddlebag panniers and a roomy enough bag that I'm able to fit smaller amounts of stuff into on my own. For larger hauls I'd love to get an
Xtracycle FreeRadical kit for one of my older commuter bikes that I don't use as much anymore. These things let you carry just about anything...
Still have to work on convincing my better half, though.
If anyone's considering taking up bicycle commuting,
here's a nice site to help get you started.