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I love animals, and I’ve kept pets since I was a child. They’re funny, sometimes loyal, they make me happy, and they keep me in touch with nature.

Over the past 20 years or so, though, pets have turned from being relatively cheap additions to the household into major moneypits.

I’ve succumbed myself. When I was a kid, I loved aquariums full of affordable tropical guppies, tetras and angelfish. These fish weren’t cheap for a young newspaper delivery boy – they cost me weeks of saved pocket money – but they were a bargain compared to what came next. After university I got into keeping tropical marine fish and corals, which are only marginally more affordable than a serious crack habit. The fish cost 10-20 times as much to buy, and you need lots of expensive equipment. Even the water costs money, since you need to buy salts to recreate the conditions of the ocean and purify the tap-water, too.

My aquarium addiction has never threatened my saving and investment budget, but I’m not sure that’s normal. If certain family members and friends of mine are any guide, many who aren’t saving for old age are spending money on pampered pets.

Pet inflation is biting. Think of the expensive crossbreeds of dogs made popular by celebrities, where once we’d have been happy with a cheerful and pretty mongrel or even a common pedigree like a lab or a spaniel. Exotic snakes and lizards costing hundreds of pounds that need to be fed with pricey live food, big outdoor aviaries for small birds, land for a pony – all big ticket items compared to the housecats of yesteryear scrounging on leftovers.

If you can afford to keep these animals, why not? But be aware it’s easy to underestimate the costs of maintaining even a dog or a cat, let alone a pot-bellied pig or a mini-coral reef in your living room. Ask the pet rescue centres who have to deal with ever more unfortunate animals outgrowing their owners’ pet budget as the credit crisis has deepened.

Here’s five things to consider when budgeting for a pet, plus one bonus for pet-owners looking on the bright side:

1. A pet is for life, so budget beyond the sticker price

A pedigree dog doesn’t cost £500 – it costs all the food, vet bills, food bowls, dog jackets, kennels, and insurance costs that add up over its lifetime.

Sainsbury’s Bank estimates the annual cost of a pedigree dog is over £500 a year, others say £10,000. One study found dogs can easily live for 10-15 years or more, bringing the lifetime cost to an average of £9,000.

That’s high enough, but imagine if instead you’d petted other people’s pooches in the park rather than buying your own and invested that £500 a year in the stock market.

If you started at 30, after 10 years you might have built up a pot of nearly £8,000 assuming 8% return a year. By the time you retire at 65, your pension pot could have grown to over £50,000.

Can you afford a dog now if it means you’ll be £50,000 poorer when you retire?

You can do these sums for all kinds of household expenses and end up thinking you shouldn’t spend a penny, true, but it’s all about priorities. I’d rather have a dog than a sports car. I see I can’t afford both when I calculate the cost to my medium-term savings goal of replacing my salary with investment income.

2. Think hard about pet insurance

Pet insurance may not be worth it. Often it’s never claimed, and rarely does it cover the entire bill of treating your animals. Pundits say it typically comes with plenty of exclusion clauses, making it hard to claim what you may feel you’re entitled to. I’ve never bought it, though I might if I had a very expensive pet.

On a positive note, pet insurance is a way of forcing you to put aside money in advance, which is better than spending on your credit card to treat your sick pet. But you’ll be paying a hefty premium for the privilege of letting someone else (the insurer) look after it for you, as one American study found:

The most important thing you need to know about pet insurance is that it is a form of enforced savings that almost never covers the entire bill. You can accomplish the same thing by paying the same monthly premium to your savings account.

The advantage: If your pet has little cause to visit a vet beyond annual checkups, the amount saved belongs to you, not an insurance company. The risk, of course, is if you run into unusually expensive veterinary needs.

The problem with pet insurance is all its fine-print pitfalls. Indeed, buying a policy may end up increasing a pet owner’s total expenditures on veterinary care by thousands of dollars, according to our analysis of five plans. That’s because on top of deductibles required by all the insurers, plus any co-pays, unreimbursed costs, and exclusions – all of which you pay out-of-pocket – you also pay premiums. Seemingly small $11 to $50 per-month premiums can add up to $2,000 to $6,000 or more over a pet’s lifetime.

If you decide to go ahead with pet insurance, rather than say putting money for vet bills aside in a dedicated account, then also be aware that comparing the offerings can be a nightmare, says The Guardian.

Be sure to start with a comparison website like Money Supermarket, and be prepared to read a lot of fine print.

3. Do you really need a bigger goldfish bowl?

Not literally: goldfish bowls are bad for any fish. I mean do you really need a 200-gallon aquarium, or are you just trying to keep up with your online neighbors?

The tanks of the month owned by elite fishkeepers at Reef Central are stunning, but the owners freely admit they take several hours, even days, to keep ticking over. The aquariums also cost several thousand pounds to set-up, and with fuel bills rising, coral tanks can cost hundreds to light each month due to the expense of trying to recreate the tropical sun indoors. (I know several aquarists downsizing for this very reason). A tank like this is an amazing sight, even if you’re not a fish fanatic, but amazing enough to eat up 25% of your annual spending or saving money, for example, and half your weekend?

Any animal lover needs to be alert to their passion overriding their common sense. Say you’re a dog fan. Is a labradoodle going to give you more pleasure on a walk than a plain labrador? Is it going to look prettier than a poodle? Unlikely. They’re lovely animals, but they’re a fashion purchase. If you’re ultimately buying one just to be trendy, get a new jacket instead – it’ll be cheaper in the long-run.

Now if you’ve truly fallen in love with some particular breed of dog or cat or you’ve planned for an eight-foot long aquarium in your living room for years, I’m right behind your purchase. Life is for living, and all that.

Just remember that with touchy-feely hobbies, like romance and kids, we too often feel grubby and cheap bringing money into the equation. I think that’s a mistake, which it brings me on to…

4. As veterinary bills go up, difficult decisions get even more difficult

Okay, this one is even trickier to address than the previous point.

The fact is it costs a lot of money to treat certain ailments of pets, whether through drugs or surgery – it can easily amount to hundreds of pounds, sometimes thousands. In the old days, pet owners would have likely had the animal put to sleep. Today, we’re more willing to spend a fortune keeping our beloved animals alive.

Look, I get why, I really do. But did the pet owners of yesteryear love their animals less? Was their dog not just as much part of the family? My recollection is if anything pets were even more important in those simpler times.

I think our society is getting softer and more hypocritical as we become richer and more cut off from the land. So people who spend £500 on vet bills for a budgie’s broken foot happily eat battery chicken eggs. Owners of the weak pedigree dogs will spend hundreds easing their pet’s discomfort, then go out and order veal or foie gras for supper.

Monevator isn’t the site to discuss the morality of any of these issues. I would urge though an element of clear-headedness comes with pet-owning. I realise having a living creature in our care that we’ve loved feels morally different to the treatment of one in a farm, but there’s no logical difference.

In practice, if you’re keeping one animal in pampered luxury while eating cheap meat, you’re throwing money away and fooling yourself.

It’s about balance. Do I take my pets to the vet? Of course. Would I spend £30 on drugs for a sick pet rabbit? Definitely. Would I consider £250 surgery to remove a possible tumour? No. Money isn’t infinite. I’d rather give animals in my charge the best care I can within reason and spend a little more on free range meat in the supermarket, than spend £700 treating a rabbit like this pet lover:

It must be a truly heartbreaking decision to have to make, and one that I hope no-one reading this ever has to confront. But with costs such as £300 to treat a broken leg in a cat and up to £1000 for the same injury in a dog, more and more animals are being referred to charities in a bid to save their lives. I myself have recently witnessed first-hand the expense that a pet can incur, as one of my rabbits came down with severe pneumonia. Thankfully, and somewhat miraculously, he came through OK, but the final bill came to over £700. Were it not for my insurance, I’m not sure where I’d have found the money.

You may feel like they did, and I respect your decision. (In this case, insurance covered the bill anyway). Just consider whether you can afford to be sentimental. If you can, no worries. If you can’t really afford it, but think you will be overcome and spend the money anyway when a beloved animal gets sick, then as the writer above says, for you pet insurance may be a necessary evil.

Be sure you understand the costs. If you can’t afford the cost of even moderate medical care for a pet, don’t buy one.

5. Could you choose a pet that earns its keep?

If you like all kinds of animals and your property has a bit of land, you could consider owning pets that are also paying guests. How about:

• Your own herd of cows? The Dexter breed is specially small and becoming popular as prices of meat and milk rise. It will provide you with all the milk you need, and mow your lawn, too.
• If you keep chickens, the eggs need not be any more expensive than in the shops, as this calculation on the cost of home-reared eggs shows, and you’ll know they’re having a happier life, too. Chickens are great fun to own – good luck if you plan to eat your pet one day, you’ll need a heart of stone to kill it.
• A trained and photogenic dog might be of interest to a pet talent agency like Animal Acting in Europe or Hollywood Paws in the States. Think carefully before you part with any cash, obviously… You might try the Kennel Club if you want to train an existing pampered pooch.

On the bright side, owning a pet might bring reduce the cost of YOUR health insurance

The health benefits of owning a pet are well-known. Studies have demonstrated they can improve mental health, increase the sociability of their owners, and even improve the latter’s life expectancy by reducing stress and encouraging exercise.

I’ve read of health insurers reducing premiums if they’re customers owned a dog that was regularly walked. Unfortunately I can’t find any evidence, as Google is overwhelmed by coverage of pet insurance when I try to look for relevant policies. If anyone can offer any pointers in the comments, that’d be much appreciated.

I hope I’ve made clear I’ve got nothing against pet owners – how could I, as a pet owner myself? I also understand that people will sometimes spend more than is strictly rational on their animals.

All I’m saying is make sure the costs of owning, maintaining, insuring and medically treating your pet are properly considered and accounted for in your budget, and not brushed aside by a warm and furry feeling that could leave you chilly in your later years.