How do they do it?

Big rugrat will be three next month. How did that happen? Husband and I have decided not to send her to preschool in the fall although many people do at age 3. We decided not to for a few reasons. One is that we are both educators (he is middle school and in my pre-mommy days I taught first grade, now I work with college kids), we feel she has many chances to interact with other children and honestly I am just not ready for her to go (I'm not sure she is either).
Because of this I would like to homeschool her next year. I have not decided I am going to set this up yet. I have pretty much settled on the Montessori method and have read books, websites and blogs on how to go about this. However, every blog I read the mom who homeschools only has one child. I have two. What do I do with little rugrat while I try to teach big rugrat? Big rugrat has the attention span of about .02 seconds. If I sit with her it increases to about 3 whole seconds (you can see why I don't want to send her to school yet). I want to work with her, and we have started. We choose a letter a week and we talk about its sound, we look at the letter and trace it with our fingers and we look for the letter in books. My method right now is completely informal, but she has grasped M (the first letter of her name), P and is working on T. We have only been doing this about a month now. She knows her colors, many shapes and can count to ten. She often can count objects up to three. I don't know if this is normal. I do know that her pretend reading is great. She picks up a book, and makes up a story and "reads" it to her dolls. This is actually a great pre-reading technique.
I ramble a bit. My main goal is to have her on equal footing with other 4 year olds when she goes to preschool the following year. Now I have to figure out how to go about it AND keep tract of little rugrat.
How is this related to living on 1 1/4 incomes? Pre-school costs a LOT more than homeschool, even when you factor in materials I may buy. This is not the deciding factor, but it definatly weighed in when we were talking about school next year.
Off to read more blogs about Montessori method.