AWS Budgets for Beginners: How to Monitor Your Cloud Spending and Avoid Overages

One of the most common concerns when working with AWS is unexpectedly high bills. Whether you’re experimenting with new services, running a production workload, or simply want peace of mind, setting up billing alerts is essential for any AWS user. In this guide, I’ll walk you through setting up AWS Budgets to monitor your spending and receive timely notifications before costs spiral out of control.

Why AWS Budgets?

AWS Budgets is a powerful service that allows you to:

• Set custom cost and usage budgets

• Receive alerts when your spending exceeds (or is forecasted to exceed) your defined thresholds

• Track costs across different dimensions like services, linked accounts, or tags

• Take automated actions when thresholds are breached

The best part? AWS Budgets itself is free for the first two budgets, and only $0.02 per day per budget thereafter.

Prerequisites

Before we begin, make sure you have:

• An AWS account with appropriate IAM permissions

• Access to the AWS Management Console or AWS CLI

• Billing data available (note: it may take up to 24 hours after creating an AWS account)

Setting Up Billing Alerts via AWS Console

Step 1: Navigate to AWS Budgets

1. Sign in to the AWS Management Console

2. Go to the Billing and Cost Management console

3. In the left navigation pane, click on Budgets

4. Click the Create budget button

5. Select Customize (advanced) option

Step 2: Choose Budget Type

AWS offers four budget types:

• Cost budget - Monitor how much you’re spending

• Usage budget - Track specific service usage (e.g., EC2 hours)

• Savings Plans budget - Monitor Savings Plans utilization

• Reservation budget - Track Reserved Instance utilization

For basic billing alerts, select Cost budget and click Next.

Step 3: Configure Budget Details

Set your budget settings:

• Budget name: Monthly-Cost-Budget

• Period: Monthly

• Budget effective dates: Recurring budget

• Start month: [Current month]

• Budgeting method: Fixed

• Enter your budgeted amount: $100

You can also choose:

• Quarterly or Annually: For longer-term tracking

• Daily: For more granular monitoring

Step 4: Set Budget Scope (Optional but Recommended)

You can filter your budget to track specific costs:

• All AWS services (default) - Tracks your entire AWS spending

• Specific services - Only track EC2, RDS, S3, etc.

• Linked accounts - For AWS Organizations

• Tags - Track costs by project, environment, or team

• Regions - Monitor spending in specific AWS regions

Example for a filtered budget:

• Filter: Service

• Select: Amazon EC2, Amazon RDS

Step 5: Configure Alerts

This is where the magic happens! You can set multiple alert thresholds:

Alert 1 - Warning (80% threshold):

• Alert threshold: 80% of budgeted amount

• Email recipients: your-email@example.com

• Amazon SNS topic: (Optional) Create new or use existing

Alert 2 - Critical (100% threshold):

• Alert threshold: 100% of budgeted amount

• Email recipients: your-email@example.com, finance-team@example.com

Alert 3 - Forecasted (100% threshold):

• Alert threshold: 100% of budgeted amount

• Trigger: FORECASTED

• Email recipients: your-email@example.com

The forecasted alert is particularly useful - it notifies you when AWS predicts you’ll exceed your budget, allowing you to take action before it happens.

Step 6: Review and Create

Review your configuration and click Create budget. You’ll receive a confirmation email at each configured email address to verify the subscription.

Best Practices

1. Set Multiple Thresholds: I recommend at least three alerts - 50%, 80%, and 100%

2. Use Forecasted Alerts: These give you advance warning based on spending trends

3. Separate Budgets for Different Environments: Create separate budgets for dev, staging, and production

4. Tag-Based Budgets: Use tags to track costs by project or team

5. Review Regularly: Adjust your budgets quarterly based on actual usage patterns

6. Configure SNS for Team Alerts: Use SNS topics to notify Slack channels or PagerDuty

7. Test Your Alerts: Lower your budget temporarily to trigger an alert and verify it works

Monitoring Your Budgets

After setup, you can:

• View budget status in the AWS Budgets console

• Check the Cost Explorer for detailed spending analysis

• Review alert history

• Modify thresholds as your usage patterns change

Conclusion

Setting up billing alerts using AWS Budgets is a crucial first step in managing your AWS costs effectively. With just a few minutes of setup, you can avoid bill shock and maintain better control over your cloud spending.

Start with a simple monthly cost budget, add multiple threshold alerts, and expand to more granular budgets as your AWS usage grows. Remember, the goal isn’t just to get notified when you overspend - it’s to create awareness and enable proactive cost management.