Back-up or Proprietary Storage

I have a MacBook Pro from around 2010 (not sure of year of manufacture but purchased new in 2010).  I have a Western Digital external HD that is 500GB in size.  I have been using it as a back-up for the last two years or so, 6 times a day, scheduled every 4 hours.  I have begun to run out of space on my computer now though.  I have gone through several times and deleted things I no longer needed but the space just doesn't seem to be there. 
So should I stop using the external drive as a back-up and keep important files on it/most files on it and free up computer HD space?

If you are using Time Machine and running low on backup space on the external drive you can simply erase the backup drive and start a fresh backup that will use less space at the start.
Keep in mind that at some point Time Machine will no longer be able to free up sufficient space to perform a backup. When that happens you will be alerted with an insufficient space warning. See the following:
About TM "Backup Drive is Full"
Alert TM only deletes older files if they have been deleted from the source and when TM needs space on the backup drive for a new incremental backup. Time Machine "thins" it's backups; hourly backups over 24 hours old, except the first of the day; those "daily" backups over 30 days old, except the first of the week. The weeklies are kept as long as there's room.
So, how long a backup file remains depends on how long it was on your Mac before being deleted, assuming you do at least one backup per day. If it was there for at least 24 hours, it will be kept for at least a month. If it was there for at least a week, it will be kept as long as there's room.
Note, that on a Time Capsule the sparsebundle grows in size as needed, but doesn't shrink. Thus, from the user's view of the TC it appears that no space has been freed, although there may be space in the sparsebundle.
Once TM has found it cannot free up enough space for a new backup it reports the disk is full. You can either erase the backup drive and start your backups anew or replace the drive with a larger drive.

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