Part 6: Automating Cost Management with AWS Budgets and Alerts

In the previous part of this series, we discussed how AWS CloudWatch can help you monitor and optimize the performance of your EC2 instances and infrastructure. Now, we will focus on another crucial aspect of cloud management: cost control. AWS provides a variety of tools for managing cloud costs, but one of the most powerful and underutilized tools is AWS Budgets. This feature helps you automate cost management by tracking your spending, setting budgets, and triggering alerts when your usage exceeds predefined limits.

In this part, we’ll dive into how you can set up AWS Budgets to proactively manage your cloud costs, receive alerts before budget overruns occur, and take action to prevent unexpected charges. We’ll also explore practical examples and best practices for keeping your AWS costs in check while maximizing the value of your cloud infrastructure.

Introduction to AWS Budgets

What Is AWS Budgets?

AWS Budgets is a cost management tool that enables you to set custom spending thresholds and receive notifications when your costs or usage exceed those limits. AWS Budgets allows you to track costs, usage, Reserved Instance utilization, and even Savings Plan coverage, helping you maintain control over your cloud spending.

With AWS Budgets, you can:

• Set spending or usage limits for your AWS account.
• Receive automated alerts via email or Amazon SNS when you approach or exceed your budget.
• Track costs and usage in near-real-time.
• Automate cost control by integrating with AWS services such as Auto Scaling, Lambda, and more.

Why Use AWS Budgets?

1. Prevent Unexpected Costs: AWS Budgets help you stay within your cloud spending limits, preventing surprise bills at the end of the month.
2. Automated Alerts: Receive alerts when costs exceed a certain percentage of your budget, allowing you to take corrective action before costs spiral out of control.
3. Usage Tracking: AWS Budgets can track not only costs but also resource usage, ensuring that you don’t exceed usage limits (e.g., data transfer, instance hours).
4. Visibility and Reporting: Gain visibility into your AWS costs and usage trends, enabling better planning and forecasting for future cloud spending.
5. Automation: Integrate AWS Budgets with other AWS services to automate actions when budgets are breached, such as scaling down resources or triggering Lambda functions.

How AWS Budgets Work

AWS Budgets allow you to create cost and usage budgets that track your AWS resources. You can set budgets for different dimensions of your AWS account, such as:

1. Cost Budgets: Track the total amount of money you are spending on AWS services. You can set thresholds for your monthly or yearly spending.
2. Usage Budgets: Monitor how much of a particular AWS resource (e.g., EC2 instance hours, S3 storage) you are using.
3. Reservation Budgets: Track the utilization of Reserved Instances to ensure that you are getting the most value from your RI purchases.
4. Savings Plans Budgets: Monitor your Savings Plan coverage to ensure you’re maximizing your cost savings from Savings Plans.

AWS Budgets send alerts when your costs or usage exceed predefined limits. Alerts can be based on either an absolute threshold (e.g., spending exceeds $500) or a percentage of your budget (e.g., 80% of your monthly budget).

Setting Up AWS Budgets and Alerts

Step 1: Create a Cost Budget

The first step is to create a cost budget. This will allow you to track your spending and set alerts when your costs exceed certain limits.

1. Go to the AWS Budgets Dashboard:

• Log in to your AWS Management Console.
• Navigate to AWS Cost Management > Budgets.

1. Create a Budget:

• Click the Create a budget button.
• Select Cost Budget.

1. Configure Your Budget:

• Set the budget type to either Fixed or Recurring.
  • Fixed Budget: Set a one-time budget for a specific period (e.g., a three-month project).
  • Recurring Budget: Set a budget that recurs monthly, quarterly, or yearly (ideal for long-term cost management).
• Enter the amount of money you want to allocate for the budget (e.g., $500 per month).

1. Set Your Budget Scope:

• You can choose to track all AWS services or filter specific services, linked accounts, regions, tags, etc. For example, you might want to set a budget for EC2 only or for a particular project tagged as ProjectA.

1. Configure Alerts:

• Set alert thresholds (e.g., 50%, 80%, and 100% of your budget).
• Enter the email address or SNS topic where you want to receive notifications.
• You can create multiple alerts for different percentages of your budget.

1. Review and Create the Budget:

• Review your settings and click Create.

Example: Creating a $500 Monthly Budget for EC2
Let’s create a recurring budget of $500 per month specifically for EC2 services and set an alert when the costs exceed 80% and 100% of the budget.

Steps:

1. In the AWS Budgets dashboard, select Create a budget > Cost budget.
2. Set the budget to Recurring and enter $500 for the monthly budget.
3. In the Budget scope, select Service filter and choose EC2.
4. Set the alert thresholds for 80% and 100% of the budget.
5. Enter your email address for receiving alerts and click Create.

Step 2: Create a Usage Budget

In addition to cost budgets, you can create usage budgets to monitor specific resources, such as instance hours, S3 storage, or data transfer. This ensures that you stay within your resource limits and avoid usage-based cost spikes.

1. Create a Usage Budget:

• Go to the AWS Budgets dashboard and click Create a budget.
• Select Usage budget.

1. Define the Resource Usage to Track:

• Select the AWS resource or service you want to track (e.g., EC2 instance hours, Lambda requests, S3 storage).
• Set the usage threshold (e.g., 500 instance hours per month).

1. Configure Alerts:

• Set alerts for when usage reaches 50%, 80%, and 100% of your budgeted resource limit.

1. Review and Create the Budget:

• Review the settings and create the budget.

Example: Tracking EC2 Instance Hours Usage
Suppose you want to track EC2 instance hours to ensure that you do not exceed 300 hours per month. You can create a usage budget and set alerts when the usage reaches 80% (240 hours) and 100% (300 hours).

Steps:

1. In the AWS Budgets dashboard, select Create a budget > Usage budget.
2. Set the budget to Recurring and choose EC2 instance hours.
3. Set the threshold to 300 hours and create alerts for 80% and 100%.
4. Enter your email address to receive notifications.

Step 3: Set Up Reservation Budgets

If you are using Reserved Instances or Savings Plans, you can create budgets to track the utilization and coverage of your RIs or Savings Plans. This helps ensure that you are fully utilizing your reserved capacity and getting the most value from your long-term commitments.

1. Create a Reservation Budget:

• In the AWS Budgets dashboard, select Create a budget.
• Choose Reservation budget.

1. Define the Scope:

• Select the type of RI or Savings Plan you want to track (e.g., EC2 Reserved Instances).
• Set the budget to track utilization or coverage. For example, you can create a budget to ensure that your RI utilization stays above 90%.

1. Configure Alerts:

• Set alerts to notify you if your utilization falls below a specific threshold (e.g., 85% utilization).

1. Review and Create the Budget:

• Review the settings and create the budget.

Step 4: Automate Cost Management with Actions

AWS Budgets can be integrated with other AWS services to automate responses when budgets are exceeded. For example, you can trigger Auto Scaling actions to scale down instances or invoke a Lambda function to shut down non-essential resources when costs approach a predefined limit.

Automating Cost Control with Lambda:
Let’s say you have a non-critical development environment that can be shut down if costs exceed 90% of your budget. You can use AWS Lambda to automate the shutdown of instances when the budget alert is triggered.

Steps:

1. Create a Lambda function that stops all EC2 instances in a specific region.

   import boto3

   def lambda_handler(event, context):
       ec2 = boto3.client('ec2', region_name='us-west-2')
       instances = ec2.describe_instances(Filters=[{'Name': 'instance-state-name', 'Values': ['running']}])
       instance_ids = [instance['InstanceId'] for reservation in instances['Reservations'] for instance in reservation['Instances']]

       if instance_ids:
           ec2.stop_instances(InstanceIds=instance_ids)
           print(f"Stopped instances: {instance_ids}")

2. In the AWS Budgets dashboard, create a cost budget.
3. Set the budget and configure alerts for 90% and 100% of your budget.
4. Under Action Settings, choose SNS Notifications and configure the alert to trigger the Lambda function when the budget is breached.

This automation ensures that if your budget exceeds the 90% threshold, non

-critical resources are shut down automatically, preventing further cost overruns.

Automating Resource Scaling with Auto Scaling:
Another way to automate cost management is to integrate AWS Budgets with Auto Scaling. You can configure an Auto Scaling policy to scale down instances or containers if your budget is exceeded.

Steps:

1. Create a budget with an alert set at 90% of your budget limit.
2. Set up an Auto Scaling Group (ASG) with a scaling policy that reduces the number of instances when costs approach the budget limit.
3. Configure the budget alert to trigger the Auto Scaling action when the threshold is breached.

Best Practices for AWS Budgets and Alerts

1. Set Multiple Alert Thresholds: Don’t wait until your costs have exceeded 100% of your budget to take action. Set multiple alert thresholds (e.g., 50%, 80%, and 100%) so you have time to address potential issues before they become problems.

2. Automate Responses with Lambda: Use Lambda functions to automate responses to budget alerts. For example, automatically shut down non-critical resources or scale down instances when budget limits are exceeded.

3. Monitor Usage as Well as Costs: Costs are important, but usage metrics can provide deeper insights into resource utilization. Set usage budgets to track resource consumption, such as EC2 instance hours or S3 storage, to avoid exceeding usage-based limits.

4. Regularly Review Your Budgets: AWS costs can fluctuate depending on usage patterns, service pricing changes, or new resource deployments. Regularly review and update your budgets to ensure they accurately reflect your spending and usage.

5. Track Reserved Instances and Savings Plans: If you use Reserved Instances or Savings Plans, create budgets to track their utilization. Under-utilized RIs can lead to wasted costs, so make sure you’re getting the full value of your long-term commitments.

Conclusion

In this part of the series, we’ve explored how to set up AWS Budgets to automate cost management and prevent unexpected charges. By creating cost, usage, reservation, and Savings Plan budgets, you can track your AWS spending in real-time, receive alerts when thresholds are exceeded, and take corrective actions to stay within your budget.

AWS Budgets is a powerful tool that, when combined with automation through Lambda and Auto Scaling, can help you maintain control over your cloud spending while ensuring that your resources are used efficiently.

In the next part of this series, we’ll focus on advanced performance tuning techniques with AWS Compute Optimizer to further improve the performance and cost-efficiency of your infrastructure. Stay tuned!