Yes, Time Machine will backup until it fills the backup disk and then it will start overwriting old backups to make way for new ones. However, if the volume of data you've told Time Machine to backup exceeds the size of the disk Time Machine is using to save the backups on, it will complain that the disk is too small. If you have a Time Machine disk which is smaller than the combined size of the hard disks used by your Mac, it's likely you'll need to manually intervene at some stage due to this issue unless you're very diligent about ensuring that you don't ask it to backup too much data.
You probably want to check out this website for the most information, but here is the answer to your question, quoted from the website above:
1. How big a drive do I need for Time Machine?
A general "rule of thumb" is, to keep a reasonable "depth" of backups,
Time Machine needs 2 to 4 times as much space as the data it's
backing-up (not necessarily the entire size of your internal HD). Be
sure to add the size of the data on any other drives/partitions you
want to back up.
But this varies greatly, depending on how you use your Mac. If you
frequently add/update lots of large files, then even 5 times may not
be enough. If you're a light user, you might be able to get 1.5 times
to work, but that's subject to problems any time a large backup is
needed.
And, of course, the larger the drive, the more old backups Time
Machine can keep for you. A drive that's too small may only have room
for a few weeks (or even days) of backups.
Unfortunately, it's rather hard to predict, and most of us have a
tendency to add more and more data to our systems over time, so if in
doubt, get a bigger one than you think you need now.
Also, there are some OSX features and 3rd-party applications that take
up large amounts of backup space, for various reasons. See question
9 for details.
This is a trade-off between space and how long Time Machine can keep
its backups, since it will, by design, eventually use all the space
available. But it won't just quit backing-up when it runs out: it
starts deleting the oldest backups so it can keep making new ones.
Thus, the more space it has, the longer it can keep your backups.
If your backup disk is on the small side, and Time Machine needs to do
a very large backup, either because you've added or changed a lot or
done something like an OSX update since the previous backup, you may
get one of the messages in Troubleshooting item #C4 (which one
depends on exactly what happened, and which version of OSX you're on.)
My Answer
Then it'll only take a snapshot that's about 120GB in size, and while that same snapshot will grow over time as I take more recent snapshots of my system, it will never go beyond 500GB because that's the maximum size of my internal HDD.
No, not quite. The 1 TB hard drive will be filled up because Time Machine keeps your backups and deletes them once your hard drive is filled. There is more than one backup stored on that hard drive. As stuffe pointed out as well, Time Machine allows you to restore to a previous backup, since Time Machine may keep 7 or 8 backups on that 1 TB hard drive.
I'm asking this because I want to know if I should use a separate external HDD for storing my actual files.
Yes, you should. You should be dedicating a drive to Time Machine. Here is the quoted answer from 3 in the website I linked above:
3. Can I use my Time Machine disk for other stuff?
Yes. Time Machine will not delete anything you put there. But it's
not a good idea to put anything else important on the same physical
drive, unless you back it up elsewhere. When (not if) that drive
fails, you risk losing it.
If you want to do this anyway, it's much, much better to partition an
external drive into 2 (or more) parts, also called volumes. Assign
one to Time Machine, for its exclusive use for backups; use the other
partition(s) however you want. To use a new drive, or one you don't
mind erasing, see question #5. To add a partition to an existing
drive that already has data on it, see question #6.
Best Answer
So if I understand correctly, you want to exclude the 1TB working storage volume from the backups on the 1TB backup disk, but not from those on the 1.5TB backup disk. I don’t think this is supported by
tmutil’saddexclusionverb, as it does not provide a way to specify that you only want to exclude the item from a specific backup disk.To hack a solution yourself, you could basically, before making a backup, invoke either
addexclusionorremoveexclusiondepending on which disk you will be backing up to. If you don’t plan on having both backup disks connected at the same time, you could automate this by running a script when you connect one of the two backup disks, see the question on “How to run Applescript on Disk mount” for possible solutions. If you do want to have both backup disks connected at the same time, you will probably also have to turn off automatic backups and hack your own solution to periodically run thestartbackupverb (using its-dargument to alternate between the two disks).Note that I didn’t try hacking this myself, so there might be “caveats” I’m not thinking of. One thing I’m not sure about is whether or not toggling the exclusion on and off again for the 1TB working storage volume will cause Time Machine to do a “deep scan” of the volume again on the next backup, which would make your backups take longer, depending on how many files and directories it holds. In the end, you’ll have to evaluate yourself whether hacking this is worth the additional hassle, given that an external 2TB USB drive can easily be had on Amazon for 65 USD or less.