Running out of space - storing in iCloud
I have my iCloud turned on, minus a few applications I don't want/need stored in iCloud. However, my system tells me often that I'm running out of space and to store everything in iCloud... I am! When I open the recommended actions within: about this Mac/storage/manage/recommended actions and click on "Store in iCloud" it tells me I need to sign into iCloud with my password... I've already done this and I get the same message every time.
I'm not sure what I'm missing or doing wrong here. I don't know why there's an option to store things in the cloud if it's going to take up space on my Mac as well. Help if you can, thanks.
MacBook Pro 13″, macOS 11.6