Is it best to back up your iMac with Time Machine automatically with an external drive?

Any idea what 'crashed' your friend's iMac? Is it possible there was a lightning strike or other similar electrical event that took out the iMac and the external hard drive? Like Allan, I have never heard of an iMac event taking out the external hard drive as well unless there were other factors at play.

After losing my data once, I now keep a Time Machine backup running continuously, plus a separate backup that I update monthly and then store away in a safe. I just want to make sure I don't lose my data.

Yes. Backup of course. This is the first time I have ever heard of such a thing happening.

A Time Machine backup is good for restoring all your data, or a single file that you might need to find an older version for some reason. Time Machine will fill up the entire drive with backups and older versions, making room for newer versions by deleting the oldest. When you have a hard drive failure and replace a drive, it can take quite a long time to restore all your data from the Time Machine backup.

In addition to a Time Machine backup, I like to make a bootable clone of my entire boot drive. When that drive fails, I can immediately boot from the clone backup and can continue to use the machine. (I like Carbon Copy Cloner, but other tools can do this also)

The first time you make a backup, it takes a lot of time. Subsequent backups are just incremental and only copy changed or new files, so those can be run on a daily basis fairly quickly, once you have established the initial full backup.