Explanation

AWS Budgets is the correct answer because it provides both cost tracking and alerting capabilities:

• Cost Tracking: AWS Budgets allows you to set custom budgets that track your AWS costs and usage
• Event-Driven Alerts: You can configure budget alerts to notify you via email or SNS when your costs exceed predefined thresholds
• Proactive Monitoring: Unlike other tools that provide historical reporting, AWS Budgets enables proactive cost management

Comparison with other options:

• AWS Cost Explorer: Provides historical cost analysis and visualization, but lacks real-time alerting capabilities
• Cost allocation tags: Helps organize and categorize costs, but doesn't provide alerting functionality
• AWS Cost and Usage Reports: Offers detailed billing data for analysis, but doesn't include built-in alerting features

AWS Budgets is specifically designed for setting cost thresholds and receiving notifications when those thresholds are breached, making it the ideal solution for the described requirements.