Cost Management Tools: Cost Explorer, Budgets, Savings Plans

Lesson Objectives

By the end of this lesson, you will:

1. Understand how AWS Cost Management tools help monitor and optimize your spending.
2. Learn to use Cost Explorer to analyze historical and forecasted costs.
3. Set up Budgets to track spending and receive alerts.
4. Explore Savings Plans for long-term cost optimization.

Introduction: Keeping Costs Under Control

Imagine running a large-scale AWS environment where costs can quickly spiral out of control if not monitored. AWS provides powerful tools to help you analyze spending, set alerts for overruns, and optimize costs for predictable workloads.

In this chapter, we’ll focus on Cost Explorer, Budgets, and Savings Plans, which together ensure you’re always in control of your AWS expenditures.

Cost Explorer: Analyzing and Visualizing Costs

What is Cost Explorer?

Cost Explorer is an AWS tool that helps you visualize and analyze your AWS costs and usage over time. It provides detailed insights into your spending patterns and can project future costs.

Key Features:

1. Cost and Usage Reports: Break down costs by services, regions, or linked accounts.
2. Forecasting: Predict future spending based on historical trends.
3. Custom Reports: Create detailed reports tailored to your needs.

Step-by-Step: Using Cost Explorer

1. Enable Cost Explorer:
   • Log in to the AWS Management Console.
   • Navigate to Billing and Cost Management and click Cost Explorer.
   • Click Enable Cost Explorer if it’s not already active.
2. View Cost and Usage:
   • In Cost Explorer, click Explore Cost and Usage.
   • Set the time range (e.g., last 6 months).
   • Group costs by Service to see spending per AWS service.
3. Analyze Trends:
   • Identify cost spikes or trends.
   • Example: High S3 costs during data migration.
4. Forecast Future Spending:
   • Click Forecast to predict costs based on past usage patterns.

AWS Budgets: Tracking and Controlling Costs

What is AWS Budgets?

AWS Budgets helps you set spending thresholds and receive alerts when costs approach or exceed those limits.

Key Features:

1. Spending Alerts: Notifications for actual or forecasted spending.
2. Usage Budgets: Track resource usage, like EC2 hours or S3 storage.
3. Cost Budgets: Set limits on total spending.
4. Actionable Alerts: Automatically adjust services or notify stakeholders.

Step-by-Step: Setting Up a Budget

1. Access AWS Budgets:
   • In the Billing and Cost Management dashboard, click Budgets.
2. Create a New Budget:
   • Click Create Budget and choose Cost Budget.
3. Define Budget Details:
   • Name: MonthlyBudget.
   • Period: Monthly.
   • Amount: $500 (set your spending limit).
4. Set Alerts:
   • Add an alert for when actual spending reaches 80% of the budget.
   • Add another alert for 100%.
5. Notification Recipients:
   • Provide email addresses for alerts.
6. Review and Create:
   • Confirm the settings and create the budget.

Savings Plans: Optimizing Long-Term Costs

What are Savings Plans?

Savings Plans are flexible pricing models that offer significant savings on AWS usage in exchange for a commitment to consistent usage (measured in dollars per hour) over 1 or 3 years.

Key Features:

1. Compute Savings Plan:
   • Applies to EC2, Fargate, and Lambda usage.
   • Offers up to 66% savings compared to On-Demand pricing.
2. EC2 Instance Savings Plan:
   • Specific to EC2 instance families and regions.
   • Offers the highest savings for predictable EC2 workloads.
3. Flexibility:
   • Savings apply even if you switch instance types or regions.

Step-by-Step: Purchasing a Savings Plan

1. Access Savings Plans:
   • In the AWS Management Console, search for Savings Plans.
2. Explore Recommendations:
   • View AWS’s suggestions based on your past 6 months of usage.
3. Choose a Plan:
   • Select Compute Savings Plan for flexibility.
   • Choose a commitment level (e.g., $10/hour) and duration (1 or 3 years).
4. Purchase the Plan:
   • Review the savings and confirm your purchase.

Practical Example: Using All Three Tools

Scenario: Managing Costs for a Web Application

1. Use Cost Explorer:
   • Analyze spending trends and identify that EC2 instances are driving costs.
2. Set Budgets:
   • Create a budget to alert you when monthly EC2 costs exceed $300.
3. Optimize with Savings Plans:
   • Purchase a Compute Savings Plan to reduce EC2 costs by up to 66%.

Best Practices for Cost Management

1. Enable Tags: Use tags to allocate costs to specific projects or teams.
2. Monitor Regularly: Check Cost Explorer and Budgets monthly to stay informed.
3. Review Recommendations: Use AWS Cost Optimization tools for insights.
4. Combine Discounts: Use Savings Plans with Reserved Instances for maximum savings.

Reflection: Controlling Costs Effectively

AWS provides robust tools to ensure you have visibility and control over your spending:

1. Cost Explorer: Analyze historical and forecasted costs.
2. Budgets: Proactively monitor and limit spending.
3. Savings Plans: Optimize costs for predictable workloads.

By combining these tools, you can reduce waste, predict expenses, and optimize resource usage.

What’s Next?

In the next chapter, we’ll deploy a Simple Web Application using multiple AWS services, integrating your knowledge of EC2, RDS, and more.

Your cost management skills are growing—let’s put them into action!