How do I set up a 5TB external drive for Time Machine backups and storage on my 2TB MacBook Pro?

How do I set up 5tb external drive drive for Time Machine to back up my 2tb MacBook Pro and have space for storage. My drive is a Digital 5TB Drive and it would be good to keep it plugged in for regular backups but also use space for storage . What is the best way to do this? should I partition it? how much space should be allocated for TM? Which type of formatting is best ? Any help appreciated :)

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