Cloud services are great, but they are NOT backups. They don't preserve versions of files. You can get locked out of them if something happens to your account. They can go offline. And most importantly, if a file gets corrupted and then synced up to iCloud Drive in that corrupted state... well, you're kind of ****ed because you have nothing at all to recover from.
Not having enough storage to host all of your files can make it hard to make full backups of everything you own. If you're just letting your cloud service host all your files and you don't have them all synced locally (as in iCloud Drive's Optimized Storage) your physical backups will have gaping holes where you're "backing up" just empty pointers to files that are not stored on your SSD.
The way I deal with this is to have enough storage plugged into my iMac that I can turn Optimized Storage OFF and run full Time Machine backups of everything.
Another route is to use Carbon Copy Cloner, which has a new feature that enables it to connect to your cloud storage and copy files right onto your backup.
And finally, even setting aside the issue of backup, if you are working with a lot of big files you very well may find yourself downloading the same stuff over and over if your local storage is too small to hold what you need to work on. It can get very tiresome and downright disruptive if you're moving around on a laptop and not connected to good wifi all the time.
Add that all up, and that $200 for extra storage starts to seem not so bad, IMO.
