You can't upgrade the internal drive on the MacBook (but I think you know that).
You probably can't boot from an external drive (with m-series CPU) UNLESS you erase the drive and start over.
Drive will have to be in APFS, GUID partition format.
You DO NOT want to do this anyway, on a regular basis.
Booting from an external drive (on m-series) IS NOT like doing it on an Intel Mac.
I have a MacBook Pro 14", and I -CAN- boot from an external drive, but that's only for some very specific circumstances. NOT "regularly".
You can connect and use an external drive for additional storage if you wish.
If it's a 1tb 2.5" SATA SSD, just get an enclosure like this:
SABRENT 2.5 Inch SATA to USB 3.0 Tool Free External Hard Drive Enclosure [Optimized for SSD, Support UASP SATA III] Black (EC-UASP)
www.amazon.com
But again... you don't want to be booting from it.
Really,
"the solution" is:
Sell or trade-in the MacBook you have.
Get a new (or Apple-refurbished) MacBook with an internal drive that is 1tb or 2tb.