Reserved Instances and Savings Plans in AWS - Step-by-Step Execution

Process Flow - Reserved Instances and Savings Plans

Start: Need to save AWS costs

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Choose between Reserved Instances or Savings Plans

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Reserved Instances

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Select instance type

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Commit 1-3 years

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Pay upfront or partial

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Get discounted rate

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Use AWS resources

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Save money on usage

This flow shows how you start with a need to save AWS costs, choose between Reserved Instances or Savings Plans, commit to a term, pay upfront or partially, and then get discounted rates while using AWS resources.

Execution Sample

AWS

1. Choose Reserved Instance for t3.medium
2. Commit for 1 year, partial upfront
3. Use instance for 730 hours
4. Pay discounted hourly rate

This example shows buying a Reserved Instance for a specific instance type, committing for 1 year with partial upfront payment, then using the instance and paying a lower hourly rate.

Process Table

Step	Action	Input/Selection	Result/Effect
1	Select Savings Option	Reserved Instance	Discount applies to specific instance type
2	Commit Term	1 year	Commitment period set
3	Payment Option	Partial Upfront	Partial payment made upfront
4	Use Resource	t3.medium instance 730 hours	Discounted hourly rate applied
5	Calculate Cost	On-demand rate $0.0416/hr	Discounted rate $0.026/hr applied
6	Total Cost	730 hours * $0.026	Total $18.98
7	End	Usage complete	Savings realized compared to on-demand

💡 Usage completed for the term, cost savings realized compared to on-demand pricing

Status Tracker

Variable	Start	After Step 1	After Step 2	After Step 3	After Step 4	Final
Option	None	Reserved Instance	Reserved Instance	Reserved Instance	Reserved Instance	Reserved Instance
Term (years)	0	0	1	1	1	1
Payment	None	None	None	Partial Upfront	Partial Upfront	Partial Upfront
Instance Type	None	t3.medium	t3.medium	t3.medium	t3.medium	t3.medium
Hourly Rate	$0.0416	$0.0416	$0.0416	$0.0416	$0.026	$0.026
Hours Used	0	0	0	0	730	730
Total Cost	$0	$0	$0	$0	$18.98	$18.98

Key Moments - 3 Insights

Why does the hourly rate drop after selecting a Reserved Instance?

Because Reserved Instances provide a discounted hourly rate for the specific instance type committed, as shown in execution_table step 5 where the rate changes from $0.0416 to $0.026.

Does the payment happen all upfront or partially in this example?

Partial upfront payment is made as selected in step 3, which means some cost is paid upfront and the rest is charged at the discounted hourly rate.

What happens if you use the instance less than the committed hours?

You still pay for the full commitment term, so savings depend on full usage; this is implied in the total cost calculation in step 6.

Visual Quiz - 3 Questions

Look at the execution_table, what is the hourly rate applied after step 5?

A $0.026

B $0.0416

C $0.030

D $0.050

💡 Hint

Check the 'Hourly Rate' column in execution_table at step 5

At which step is the payment option selected?

A Step 1

B Step 2

C Step 3

D Step 4

💡 Hint

Look for when 'Partial Upfront' payment is chosen in execution_table

If the term was changed to 3 years, how would the total cost change assuming same usage?

A Total cost would stay the same

B Total cost would triple

C Total cost would be less per year

D Total cost would double

💡 Hint

Refer to variable_tracker 'Term (years)' and 'Total Cost' relationship

Concept Snapshot

Reserved Instances and Savings Plans help save AWS costs by committing to usage for 1-3 years.
Reserved Instances apply discounts to specific instance types.
Savings Plans apply discounts to compute usage broadly.
You pay upfront, partial upfront, or monthly.
Discounted rates apply during usage, lowering your bill.
Commitment means you pay even if you use less.

Full Transcript

Reserved Instances and Savings Plans are AWS options to save money by committing to use resources for 1 to 3 years. You start by choosing which saving option fits your needs. Reserved Instances give discounts on specific instance types, while Savings Plans offer more flexibility across compute usage. You select a term length and payment option, such as partial upfront payment. When you use the resources, you pay a discounted hourly rate instead of the full on-demand price. This lowers your overall AWS bill. The commitment means you pay for the term even if you use less, so planning usage is important. This visual trace shows step-by-step how selecting options affects rates and costs, helping beginners understand how savings happen.