Step-by-Step Guide on How to Set Budget in AWS

Cloud computing brings agility, scale, and innovation, but it also comes with the risk of unplanned expenses. As organizations increasingly rely on AWS, managing cloud costs becomes critical to avoid budget overruns and financial inefficiencies.

That’s where AWS Budgets steps in. It enables proactive cost control by allowing you to set custom budget thresholds and receive alerts when your spending exceeds predefined limits. In this guide, we’ll walk through how to set budget in AWS and the best practices to stay ahead of cloud costs.

What is AWS Budgets?

AWS Budgets is a powerful tool within the AWS Cost Management suite that allows users to define spending limits based on actual or forecasted usage. It helps ensure that your AWS spending aligns with your business goals by:

• Monitoring service usage and costs in real-time
• Sending alerts when defined thresholds are exceeded
• Enabling AWS cost optimization through early visibility into overspending risks

Understanding how to set budget in AWS is essential for any organization aiming to enforce financial governance across cloud environments. However, setting budgets is just one part of the equation. To implement cost controls effectively, especially when building or scaling cloud-native applications, many organizations choose to hire AWS developers who are skilled at architecting solutions with budget-conscious design and resource efficiency in mind. Now let’s have a look at the basic steps. 

Steps to Set Budget in AWS

Step 1: Navigate to AWS Budgets

• Log in to the AWS Management Console
• Go to Billing Dashboard
• Under Cost Management, select Budgets

Step 2: Create a Budget

• Click on Create budget
• Choose a budget type:
  
  • Cost budget: Monitors actual or forecasted spend
  • Usage budget: Tracks service usage like hours or data transfer
  • Reservation budget: Focuses on Reserved Instances usage
• Click Next

Step 3: Define Budget Scope and Details

• Set your budget name, period (monthly, quarterly, or annually), and amount
• Choose the scope:
  • Linked accounts
  • Services
  • Regions
  • Tags (to monitor by team or project)

Step 4: Set Alert Thresholds

• Add one or more thresholds (e.g., 50%, 80%, 100%)
• Choose notification channels:
  • Email alerts
  • Amazon SNS topics (for integration with automation workflows or third-party tools)

Step 5: Review and Create

• Review your settings and click ‘Create budget’.
• Your budget is now live and will begin monitoring against the defined parameters

Best Practices for AWS Budget Management

Even with budget tools in place, missteps can lead to overspending. Here are a few best practices to maximize the value of AWS Budgets:

1. Set Multiple Threshold Alerts

Avoid relying on a single 100% alert. Instead, set staggered thresholds (e.g., 50%, 75%, 90%) to allow time for corrective action before hitting the limit.

2. Use Tags for Granular Control

Tag (Amazon S3 metadata) resources by environment, team, or department to track costs more effectively. Budgeting by tag provides deeper insight and accountability.

3. Incorporate Forecasting

Leverage AWS Budgets’ forecasted spending feature to predict if you’ll exceed your budget before it happens.

4. Automate with SNS and Lambda

Pair budget alerts with automation. For example, integrate Amazon SNS with AWS Lambda to trigger cost-saving actions when budgets are breached.

Also read about AWS lambda deployment

5. Regularly Review and Adjust

Business needs to evolve. Schedule quarterly reviews to adjust budget limits or reallocate resources based on updated usage trends.

Common Mistakes to Avoid

• Skipping alert configuration: Creating a budget without alerts defeats its purpose. Always set up timely notifications.
• Using overly broad scopes: Avoid lumping all resources into one budget. Instead, create multiple budgets by account, team, or project.
• Ignoring forecast alerts: Forecast alerts can prevent overspending before it happens, don’t overlook them.
• Lack of ownership: Define clear roles for who receives alerts and who takes action when budgets are breached.

Conclusion

Learning how to set budget in AWS is a fundamental step toward building a culture of cloud financial discipline. With the right setup, AWS Budgets empowers teams to monitor, control, and optimize spending, without surprises.

From setting clear thresholds to leveraging automated alerts and integrating forecasting, AWS Budgets helps align cloud usage with financial goals.

For businesses scaling rapidly or undergoing cloud modernization, opting for AWS managed services can bring deeper visibility, governance, and control over cloud spend.