Budget Alerts 101 - Cost Savings Starts With Understanding Budget Alerts

Read on Beehiiv | Oct 27th, 2024

Welcome to The Cloud Economist!

Last week I talked about how a company reduced their monthly AWS costs by 85% (from $10,000 to $1,500) through several optimizations, including cleaning up unused resources and right-sizing services.

The largest savings came from optimizing Fargate tasks ($2,700), removing a redundant environment ($1,500), and right-sizing database instances ($1,200), which demonstrates the impact of proper resource management.

If you missed that you can read it here.

In the question of the week, I asked:

How can AWS Trusted Advisor’s “Idle Load Balancers” check help reduce costs?

Answer:

AWS Trusted Advisor provides an “Idle Load Balancers” check that identifies ELBs that haven’t received any traffic in a specified period. By reviewing these idle load balancers and either shutting them down or consolidating their use, you can eliminate unnecessary hourly charges.

This week I have some valuable articles on AWS Budget Alerts and how using this tool can help you not only prevent over usage and surprise bills but also instate cost-aware practices for your business in the cloud.

Here are the best articles I’ve found on cloud cost savings this week, summarized.

Article 1

AWS Budget Alerts 101: Here’s Everything You Need To Know by Cody Slingerland.

The article explains the value AWS Budgets provide, including being able to monitor for actual and forecasted costs against your budget, track usage of AWS services, keeping an eye on your reserved instances and offering detailed insights into your spending patterns.

Here’s what you need to consider when setting an AWS Budget:

1. Understand your current AWS usage and costs

   • Analyze past usage to detect patterns in your usage and costs (use Cost Explorer for this)

   • Identify major cost drivers: determine which services/resources that contribute significantly to your bill.

2. Define clear objectives

   • Cost control: set spending limits to prevent budget overruns

   • Resource optimization: eliminate waste and optimize performance

   • forecasting and planning: use the budget for better financial planning and forecasting costs

3. Categorize your budget

   • by service: allocate budget to various AWS services

   • by project or team: set budgets for different projects or teams

   • by environment: set budgets for production, development and testing environments

4. Set realistic budgets

   • usage budgets: define thresholds based on usage metrics like compute hours, storage used, etc

   • time-based budgets: implement monthly budget limits

   • savings plan and reserved instances budgets

5. Monitor and adjust regularly (very important)

   • Track spending in real-time: monitor your spending in real-time and receive alerts when you approach budget limits

   • review and adjust budgets periodically: adjust budget based on usage, new projects and your business needs.

   • involve stakeholders: ensure all the right people are involved across finance and dev teams.

6. Use AWS Tools

   • AWS Cost and Usage Reports: generate reports that contain detailed data on your AWS costs and usage

   • AWS Trusted Advisor: a service that gives real-time guidance and helps you optimize your AWS environment to improve performance and cut costs.

The article adds more points like implementing governance and best practices, and considering market trends and business growth against your budgets.

Read more about it in detail in the article above.

Article 2

Saving Money with AWS: How To Use AWS Billing Alerts by CloudVisor 

AWS Billing Alerts serve as an early warning system to help you avoid unexpected costs by providing real-time notifications when spending approaches the threshold you define.

By combining alerts with AWS's suite of cost optimization tools like Cost Explorer and Trusted Advisor, you can make data-driven decisions to reduce expenses while maintaining performance, making it particularly valuable for both resource-constrained startups and efficiency-focused enterprises.

The article discusses the value that Billing Alerts provide and offers a detailed step-by-step guide on setting these up from your AWS console.

The article shares 4 best practices for using Billing alerts effectively:

1. Review thresholds regularly to match current usage patterns

2. Create separate alerts for different cost categories/services

3. Use Cost Explorer to analyze spending trends

4. Implement reserved instances for cost-effective resource management

One Tip on Cloud Cost Savings

Layering your alerts is a strategy I make a habit of implementing.

When creating billing alerts, start with a 70% threshold that notifies the development team to begin optimization efforts, escalate that to 85% to alert managers to review and approve certain actions, and finally add a 95% threshold alert that triggers executive notifications for more critical decision-making actions.

This tiering of alerts creates a clear and structured path that keeps alerts upfront and important.

This Week’s Question

What are dummy alerts in AWS Billing alerts and how do they help you detect unauthorized or unintended usage (that can bring up unnecessary costs)?

Check back here next week for the answer!

Until next week.

The Cloud Economist