Running out of space - storing in iCloud

I have my iCloud turned on, minus a few applications I don't want/need stored in iCloud. However, my system tells me often that I'm running out of space and to store everything in iCloud... I am! When I open the recommended actions within: about this Mac/storage/manage/recommended actions and click on "Store in iCloud" it tells me I need to sign into iCloud with my password... I've already done this and I get the same message every time.

I'm not sure what I'm missing or doing wrong here. I don't know why there's an option to store things in the cloud if it's going to take up space on my Mac as well. Help if you can, thanks.