# Effective Savings Rate

1. **Determine Original Cost:** Gather data on the total amount you would have spent on AWS services without utilizing any cost-saving mechanisms like RIs or Savings Plans. This is your original cost, calculated based on On-Demand prices for the same services and usage.
2. **Calculate Net Savings:** Subtract any additional costs or adjustments from the total savings. This gives you the net amount saved through cost-saving measures.
3. **Calculate Effective Savings Rate (ESR):** Divide the net savings by the original cost and multiply by 100 to get the percentage.

Mathematically, the effective savings rate (ESR) can be represented as:

<figure><img src="https://546725010-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FVu8wD7jqKKBxk7fDuEPw%2Fuploads%2FaccSn9wj1wkhzHTRCQqJ%2Fimage.png?alt=media&#x26;token=529d3e5a-201c-46e3-bf13-791faf41ad47" alt="" width="254"><figcaption></figcaption></figure>

Here's the modified example calculation:

Let's say your original cost, calculated using On-Demand prices for the same services and usage, was $15,000. Your total actual expenditure on AWS services for a month was $10,000. Let's assume there were additional costs such as data transfer fees, amounting to $1,000. Thus, your net savings would be $15,000 - $10,000 - $1,000 = $4,000.

<figure><img src="https://546725010-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FVu8wD7jqKKBxk7fDuEPw%2Fuploads%2FNWLUMjXd7MoBeNHyb8r4%2Fimage.png?alt=media&#x26;token=e76c2002-96cf-4dab-a18e-031b0b10f1bc" alt="" width="287"><figcaption></figcaption></figure>

So, your effective savings rate would be approximately 26.67%.

This adjustment incorporates any additional costs or adjustments into the calculation of net savings, providing a more accurate representation of the overall savings achieved.<br>


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