Hi - this is my strategy for a similar situation
I run two libraries. I pay for 200GB of iCloud, and have a "main" library holding all my recent photos, that is synced with iCloud and resides on my system drive. All these photos are available on all my devices. Currently I have 1 1/2 years of photographs there, taking up less than half of my iCloud space. (This dual library strategy is equally valid if you don't use iCloud but just want a smaller local library stored on your mac)
I also have an archive library which holds everything older. It is on a separate drive (correctly formatted and prepared - see link below). I use powerphotos to periodically copy photos from my main library to my archive library.
I am very very rigorous about backups. Both libraries are backed up to time machine. In addition both libraries are regularly copied to a second external drive. Finally I periodically export all original images (so that I have the actual image files separately from the photos library) and copy those to a network drive backup. I have a copy of these stored away from home also (mitigate risk of fire/theft).
To split the library the first time, take an archive copy of the whole library. If you store it on an external volume it must be formatted APFS or MacOS extended (journaled) and be on a directly connected drive (USB or Thunderbolt - no network or wifi connection)
Then on your non archive library synced with iCloud delete older images, keeping only the number of new images that will fit into half (or less) of your iCloud space (to give space for new images)
For moving to external drive see
https://support.apple.com/en-gb/HT201517
Pay particular attention to the requirements for the external drive, including the required format.
