Yes the database is on the same instance. The biggest downside to that is my droplet gets low on space as the database grows but so far it hasn’t been too much of an issue. The growing need for SSD space has pretty much matched the growing need for RAM as I increase the droplet size.

For backups: I have a bash script set up every night to run a pg_backup and send it to an S3 bucket where I store the last 7 days of backups. All static files (images mostly) are hosted on S3 with no real backup but that works fine for my particular use case.