As an add-on to tygb's advice.
As described, if you enable "Desktop & Documents" folder for iCloud, the files from these two folders will be moved to iCloud Drive, and "Optimise Storage" will automatically remove older files, that have not been used in a long time, if free storage is needed.
- To ensure, that the documents you want to keep mirrored locally, you can click the download arrow to force a download.
- To remove more local copies for files you do not need any longer locally, ctrl-click the file or folder and use the command "Remove Download".
This way you can be in control of what is mirrored locally and what is only in iCloud.