AWS makes it easy to scale, but that flexibility comes at a cost — literally. Many businesses migrate to AWS expecting cost savings, only to be hit with unexpected charges, confusing invoices, and runaway spending.
Unused resources keep running, workloads aren’t optimized, and complex pricing models make it hard to track where the money is going. By the time companies start looking into cost management, they’ve often already wasted thousands of dollars. According to the FinOps Foundation’s 2025 State of FinOps Report, out of the survey’s 861 respondents, more than 50% responded “workload optimization and waste reduction” as their top priority. That’s a clear signal that cloud cost optimization is still a major challenge.
A reactive approach to AWS cost management is like trying to fix a leaky faucet after your water bill has tripled. Instead, organizations need proactive cost strategies to optimize cloud spending without sacrificing performance.
In this article, you’ll learn everything you need to know about AWS cost management, including the main benefits, how AWS cost management works, key tools, and 14 best practices for improving cost savings. Read on!
What Is AWS Cost Management?
AWS cost management refers to the process of monitoring, analyzing, and optimizing cloud expenses to ensure efficient resource utilization while minimizing waste.
Since AWS operates on a pay-as-you-go model, costs can fluctuate based on usage, instance types, storage, data transfer, and various pricing models. Without a structured approach, businesses often overspend on underutilized resources, pay for unnecessary services, or fail to leverage available discounts like Reserved Instances and Savings Plans.
The term AWS Cost Management is commonly used in two contexts — as a process to control cloud costs and as part of AWS Billing and Cost Management, a native AWS suite that helps businesses track, analyze, and optimize cloud spend using built-in tools like AWS Cost Explorer, AWS Budgets, and AWS Cost Anomaly Detection.
Why Is AWS Cost Management So Important?
The shift to cloud computing has transformed how businesses procure and manage IT resources. Unlike traditional on-premise infrastructure, where costs were carefully planned and approved in advance, AWS allows organizations to provision resources instantly, leading to unpredictable spending patterns. While this flexibility can accelerate innovation, it also creates financial challenges, as costs can scale rapidly without clear visibility or control. Without a structured cost management approach, businesses often overprovision resources, incur unexpected charges, and struggle to align cloud expenses with budget expectations.
AWS cost management is essential for bridging this gap, ensuring that cloud investments remain efficient, predictable, and aligned with business goals. It provides the visibility, governance, and optimization strategies needed to track spending, eliminate waste, and optimize resources.
By integrating cost management into cloud operations, organizations can balance agility with financial discipline, preventing cost overruns while maximizing the value of their AWS infrastructure.
Key Benefits of AWS Cost Management
Effective AWS cost management ensures that cloud spending remains predictable, efficient, and aligned with business goals. Here’s how it helps:
Flexible pricing options for every workload
AWS provides multiple pricing models for compute workloads: On-Demand, Reserved Instances (RIs), Savings Plans, and Spot Instances — but without visibility into usage patterns, companies often stick to the default On-Demand pricing, leading to unnecessary overspending.
With AWS cost management, businesses gain real-time cost insights, making it easier to match workloads with the right pricing model. This helps maximize discounted pricing opportunities, such as committing to Reserved Instances for predictable workloads or leveraging Spot Instances for flexible, fault-tolerant applications which leads to reduced cloud costs without sacrificing performance.
Enhanced efficiency in resource utilization
Resource mismanagement is one of the biggest drivers of AWS overspending — idle instances, overprovisioned resources, and underutilized storage often go unnoticed.
AWS cost management helps organizations optimize resource utilization in two key ways: rightsizing and auto-scaling. Rightsizing focuses on eliminating inefficiencies by adjusting compute, storage, and database resources to better match actual demand, while auto-scaling dynamically adjusts capacity to ensure applications have the resources they need only when required. Together, these strategies improve overall utilization, reducing waste without compromising performance.
Increased Visibility for IT and Finance Teams
Cloud cost accountability is often a challenge, with engineering and finance teams operating in silos — infrastructure and DevOps teams focus on performance, while finance teams struggle to understand cloud spending patterns.
AWS cost management bridges this gap by providing detailed cost breakdowns and cross-team reporting. This allows engineering teams to make cost-aware architectural decisions, while finance teams gain budget clarity and cost predictability, ensuring cloud investments align with business goals.
Cloud Cost Reduction
AWS cost management provides visibility into cloud expenses, helping businesses monitor spending, identify inefficiencies, and take corrective action before costs spiral. By eliminating underutilized resources, implementing rightsizing strategies, and aligning workloads with cost-efficient infrastructure, businesses can significantly reduce cloud waste.
With a proactive cost strategy, businesses can reduce unnecessary spending while maintaining performance, availability, and scalability.
How Does AWS Cost Management Work? The Core Elements
AWS cost management works through a structured approach that includes tracking, organizing, analyzing, controlling, and optimizing cloud costs. This ensures businesses can understand their cloud expenses, take corrective actions, and prevent unnecessary spending.
Image Source: AWS Blog
Access – Gain Visibility into AWS Costs
The foundation of AWS cost management is cloud cost visibility. Organizations need real-time access to billing data and usage trends to track spending across different services, accounts, and regions. Without visibility and reporting, costs can spiral unnoticed, leading to budget overruns. AWS provides detailed billing dashboards and reports to help businesses monitor their month-to-date spending, identify cost drivers, and compare past usage patterns.
Organize – Categorize Costs for Better Accountability
Managing AWS costs effectively requires organizing expenses by project, team, or department. AWS enables organizations to use cost allocation tags and linked accounts to break down spending based on internal structures. This categorization ensures that businesses know who is consuming resources and how much they are spending, helping allocate budgets more accurately and hold teams accountable for cloud usage.
Understand – Analyze Cost Drivers and Identify Trends
Once costs are organized, the next step is analyzing spending trends and identifying inefficiencies. Businesses need to drill down into their cloud usage, track which workloads consume the most resources, and pinpoint areas where costs can be reduced. By grouping and filtering cost data, companies can spot patterns, detect anomalies, and make data-driven decisions to prevent overspending.
Control – Set Budgets and Prevent Overspending
Preventing cost overruns requires proactive controls. Businesses should set custom cost thresholds and alerts to ensure they stay within planned budgets. Cost management best practices include defining per-team budgets, monitoring forecast vs. actual costs, and setting up alerts for unexpected spikes in usage. By taking a proactive approach, businesses can react quickly to cost fluctuations before they impact financial goals.
Optimize – Reduce Unnecessary Spending and Improve Efficiency
Optimization is a continuous process in AWS cost management. Once businesses understand their cost patterns, they can implement strategies to reduce waste, such as rightsizing instances, eliminating unused resources, adjusting storage tiers, and choosing cost-effective pricing models. AWS cost management enables teams to identify underutilized workloads and optimize them for better efficiency without compromising performance or scalability.
Native AWS Cost Management Tools To Know
AWS provides a range of built-in cost management tools designed to track, analyze, and optimize cloud expenses. Here’s how these tools help businesses gain cost visibility, prevent overspending, and drive savings:
AWS Cost Explorer
AWS Cost Explorer offers detailed cost analysis and forecasting by providing visual insights into AWS spending patterns. Users can create custom reports that break down costs by service, account, region, cost category, or instance type.
Image Source: AWS Blog
Key features:
- Interactive visualizations to analyze spending trends over time
- Filtering and grouping options for detailed cost breakdowns
- Forecasting capabilities to predict future expenses based on past usage
- Cost and usage comparisons to evaluate different pricing models
AWS Budgets
AWS Budgets enables businesses to set custom budgets and receive alerts when costs approach or exceed defined thresholds. This ensures proactive cost control rather than reacting after a bill has already increased.
Key features:
- Custom cost, usage, and reservation budgets for real-time tracking
- Alerts via email or Amazon SNS when spending nears budget limits
- Integration with AWS Cost Anomaly Detection for detecting unusual spending
AWS Cost And Usage Reports
AWS Cost and Usage Reports provide the most granular level of cost and usage data in AWS. Businesses can use CUR to analyze billing details and integrate the reports with third-party solutions like ProsperOps for deeper cost optimization.
Key features:
- Comprehensive billing data with hourly, daily, or monthly granularity
- Detailed breakdown by account, service, region, and usage type
- Integration with business intelligence tools for advanced cost analytics
- Support for custom cost allocation strategies
AWS Cost Allocation Tags
AWS Cost Allocation Tags allow businesses to categorize and track AWS spending by applying metadata labels to resources. These tags help organize cloud costs by team, project, department, or environment.
Key features:
- Custom tagging for resource-level cost tracking on EC2 instances, S3 buckets, EBS volumes, etc)
- Integration with AWS Cost Explorer, AWS Budgets, and AWS CUR
- Filtering and grouping based on tags for better cost visibility
- Automated tag enforcement through AWS Organizations
AWS Cost Anomaly Detection
AWS Cost Anomaly Detection leverages machine learning to identify unusual spending patterns and prevent unexpected cost spikes.
Image source: AWS
Key features:
- Automated anomaly detection across AWS services and accounts
- Customizable alert thresholds based on historical usage trends
- Root cause analysis to pinpoint the source of anomalies
- Integration with AWS Budgets for proactive cost control
AWS Trusted Advisor (Cost Optimization Checks)
AWS Trusted Advisor provides automated cost optimization recommendations by scanning AWS environments for unused or underutilized resources.
Key features:
- Identifies idle EC2 instances, unused load balancers, and overprovisioned RDS instances
- Suggests alternative pricing models for better cost efficiency
- Includes security, fault tolerance, and performance insights
- Custom dashboards for tracking cost-saving opportunities over time
Challenges of AWS Cost Management
Managing AWS costs comes with a few challenges that can impact budgeting, resource allocation, and overall cloud strategy. Let’s look at the key hurdles you’re likely to face when trying to control AWS spending.
Establishing cloud cost accountability
You may find it hard to determine which teams or projects are responsible for specific cloud expenses, which can lead to:
- Unchecked spending
- Difficulty in budget allocation for chargeback and/or showback
- Reduced motivation to optimize resources
You’ll need to implement tagging strategies, cost allocation reports, and team-specific budgets to help track usage and spending across departments. But remember that setting up and maintaining these systems means ongoing effort and coordination.
Forecasting AWS costs
Predicting future AWS costs is challenging due to elements like variable pricing models, fluctuating resource usage, and the introduction of new services.
To make matters worse, usage patterns can also change quickly, which can affect your forecasts. Further, AWS often updates its pricing and introduces new cost-saving options.
To improve forecasting, use AWS cost management tools to analyze historical data, but consider using third-party forecasting tools as well for deeper insights. Keep in mind that forecasts are estimates and may not account for unexpected spikes in usage or changes in your infrastructure.
Administrative overhead
Managing AWS costs requires substantial administrative effort. You’ll need to monitor usage constantly, analyze billing reports, and implement and enforce cost control policies.
Overhead like this can be huge, especially for larger organizations, and you’ll likely need dedicated personnel or teams to manage it effectively.
But you can reduce the administrative burden by:
- Automating cost monitoring and reporting
- Setting up alerts for anomaly detection
- Using AWS Organizations for centralized management
These strategies can help minimize the time and resources required for ongoing cost management, leaving more capacity to focus on core business objectives.
Manual management
Relying on manual processes for AWS cost management is inefficient and prone to error. Time-consuming data collection, difficulty in identifying cost drivers, and delayed responses to overspending can mean missed optimization opportunities and increased costs. It’s also a full-time job to keep up with AWS’ fast-changing services and pricing models.
14 Best Practices in AWS Cost Management
AWS cost management requires a strategic approach and ongoing attention. By implementing these 14 best practices, you can optimize your cloud spending and maximize the value of your cloud investments:
1. Prioritize understanding usage and cost
Set up comprehensive monitoring and reporting systems to track your AWS usage and costs, and use AWS Cost Explorer to visualize and analyze your spending patterns. Create custom reports to gain insights into resource utilization and identify cost-saving opportunities.
Next, set up a solution like AWS Cloud Intelligence Dashboards to display AWS Cost and Usage Reports to provide published detailed breakdowns of your AWS costs for all stakeholders and application owners to consume. These reports provide granular data on your resource consumption, helping you pinpoint areas for optimization.
2. Establish a tagging policy
Implement a consistent tagging strategy to identify, organize, segment, and search your AWS resources. Tags help you categorize and track costs across different projects, departments, or environments.
Create a standardized set of AWS cost allocation tags that include information like owner, project, cost center, and environment. And enforce tagging policies using AWS Config, Service Control Policies, custom automation, or Infrastructure as Code.
3. Create an AWS budget and track it often
Develop a comprehensive AWS budget based on your anticipated cloud usage and business needs. Make sure to set realistic targets for each service and resource type.
Use AWS Budgets to create and manage your budgets. Set up budget actions to automatically respond to overspending, such as stopping EC2 instances or restricting access to certain services.
Regularly review and adjust your budgets as your needs change. Compare actual spending to budgeted amounts and investigate any significant discrepancies.
4. Leverage Reserved Instances and Savings Plans
Take advantage of Reserved Instances (RIs) and Savings Plans to reduce your EC2 and other service costs. Start by analyzing your usage patterns to determine which option is best for your workloads. For steady-state workloads, consider purchasing RIs with a one- or three-year commitment. Use AWS Cost Explorer’s RI recommendation tool to identify potential savings.
5. Foster collaboration across finance, engineering, and leadership
Foster a culture of collaboration among finance, engineering, and leadership to ensure a holistic approach to cost management. A useful approach here is to establish regular meetings to discuss cost trends and optimization strategies.
You should also create shared dashboards and reports that provide visibility into AWS costs for all stakeholders. And finally, you should encourage open communication about the cost implications of architectural decisions.
6. Enable autoscaling for enhanced efficiency
Implement AWS Auto Scaling to automatically adjust your resource capacity based on demand. This ensures that you only pay for the resources you really need.
Set up scaling policies that respond to metrics like CPU utilization, network traffic, or custom application metrics. And use target-tracking scaling policies for simplified management.
7. Optimize virtual machine (VM) sizing
Regularly assess your EC2 instance sizes to ensure they match your workload requirements. Use AWS Compute Optimizer to receive rightsizing recommendations based on your usage patterns.
Consider using smaller instance sizes with higher concurrency for cost-effective scaling, and experiment with different instance types to find the optimal price-performance ratio for your applications.
8. Define clear cost ownership and accountability
Assign clear ownership of AWS costs to specific teams or individuals. Accountability ensures someone is responsible for monitoring and optimizing costs for each workload or project.
Next, implement chargeback or showback models to allocate costs to the appropriate business units. Use AWS Organizations and consolidated billing to manage costs across multiple accounts.
Create a cost optimization team or designate cost champions within each department. These individuals can drive cost-saving initiatives and share best practices across the organization.
9. Identify and remove unused resources
Regularly audit your AWS environment to identify and remove unused or underutilized resources. You can use AWS Trusted Advisor to get recommendations on cost-optimization opportunities.
Set up automated processes to detect and terminate idle EC2 instances, unattached EBS volumes, or outdated snapshots. Consider using AWS Config rules to enforce cleanup policies.
Another piece of advice here is to install lifecycle policies for S3 objects to automatically move data to cheaper storage tiers or delete unnecessary files. Finally, review and delete unused AMIs, snapshots, and other resources that incur storage costs.
10. Maximize usage of AWS Free Tier
Take full advantage of the AWS Free Tier for eligible services. The AWS Free Tier lets you explore 100+ AWS services at no cost, helping you experiment before committing. It includes three types: Free Trials, which offer limited-time access before switching to pay-as-you-go (e.g., Amazon Redshift’s two-month free trial); 12 Months Free, available only to new AWS customers for select services; and Always Free, which provides indefinite free usage of certain services (e.g., AWS Lambda’s 1M free requests per month). But be aware of the usage limits and monitor your consumption to avoid unexpected charges.
Learn more about the different pricing models here: AWS Pricing models
11. Optimize costs with Spot Instances
Use Spot Instances for non-critical, fault-tolerant workloads. Spot Instances offer up to 90% savings over On-Demand pricing by using spare AWS capacity. They’re ideal for non-critical workloads like batch processing and big data but can be interrupted anytime.
Implement a hybrid approach, using a mix of On-Demand, Reserved, and Spot Instances to balance cloud cost savings with reliability and performance needs.
12. Educate and train the team
Invest in AWS cost management training for your team and split the training into separate sessions for different teams.
Make sure that developers, operations staff, and finance personnel understand the cost implications of their decisions. Encourage team members to earn AWS certifications as well. It can help if you also establish an environment that publicly rewards and recognizes such achievements.
One other thing you can do is organize regular knowledge-sharing sessions. Here, team members can discuss cost-saving strategies and lessons learned from recent projects.
13. Foster a culture of cost-consciousness
Promote a culture where cost optimization is a shared responsibility across the organization. As mentioned in the last section, it’s helpful to recognize and reward individuals or teams that successfully implement cost-saving measures.
Include cost considerations in your development and deployment processes. You should also encourage developers to think about the cost implications of their architectural choices.
14. Set goals, measure, and improve
Cost optimization is not a one-time effort — it’s an ongoing process. Establish clear cost-saving goals aligned with business objectives, such as reducing unused resources, increasing Reserved Instance coverage, or improving rightsizing strategies.
Regularly measure progress using AWS cost reports, budgets, and performance metrics to ensure optimization efforts are working. Conduct periodic cost reviews, benchmark against industry standards, and refine strategies based on new insights. By continuously monitoring, measuring, and improving, businesses can ensure long-term cost efficiency in AWS.
Boost Your AWS Cost Management With ProsperOps
Managing AWS costs manually is complex, time-consuming, and prone to inefficiencies. While AWS provides native cost management tools, they often require constant monitoring, manual intervention, and deep expertise to extract maximum savings. Without automation, businesses risk missing optimization opportunities, reacting too late to cost spikes, or failing to fully utilize AWS discount programs.
This is where ProsperOps comes in.
ProsperOps delivers cloud savings-as-a-service, automatically blending discount instruments to maximize your savings while lowering commitment lock-in risk. Using our autonomous discount management platform, we optimize the hyperscaler’s native discount instruments to reduce your cloud spend and place you in the 98th percentile of FinOps teams.
This hands-free approach to AWS cost optimization can save your team valuable time while ensuring automation continually optimizes your AWS discounts for maximum Effective Savings Rate (ESR).
Make the most of your AWS cloud spend with ProsperOps. Schedule your free demo today!
