Chi
You can create the most elaborate back yard in the neighborhood but it is all in vain and wasted if it does not function well for your family. Most of us seem to want a beautiful and flourishing yard landscaped with pretty shrubs, plants and flowers, but when you have a family to consider, you must consider their needs and wants also. A practical working solution is to divide whatever area you have into more than one part. Consider creating a space for relaxation, one for gardening, one for the kids and even a separate one for pets. Obviously your choices will be determined by your needs and the amount of space available.
An open area covered with grass is ideal for the children and pets. If space is in short supply a table off to the side of the area would work well as a rest for you or a place to have a pleasant evening meal. You can also have some hardy shrubs or flowers around the perimeter of this area.
Have pets? A separate area away from the children's area is usually best. Pets like children need room to run and romp; but often the two have trouble co-existing. I don't think I need to explain that one. Minimal if any flowers and shrubs should be included in the pet area because they just become targets for you know what.
Most of us feel a need for privacy in our back yards. Some type of shrub or other planting that screens the view from the street or neighbors might be much more pleasing to the eye that a wood fence. Also consider some visual screen to block your view of the trash cans we all have to keep. A mechanical enclosure works but so does a living fence. And the living fence has more visual appeal.
I hope I have made the point that proper planning before the first shovel full of dirt is moved is the logical way to do this. The entire project does not need to be completed at the same time or even in the same year. Just create a master plan before you start and do what time and money allow when you have both. Prioritize your goals. Children and pets may and probably should have a higher priority rating than flowers and shrubs. But, be sure to reserve some space just for yourself to do what you want, even, if, you assign your own priority the lowest rating on the list.
Having a plan, considering the needs of all the family members, and creating space that works for them will result in the most beautiful yard in the entire neighborhood in the eyes and opinions of the only people who really matter, those who live there.
Be sure to find some small space where you can sit and watch the beauty and joy you have created for your family.