I see a few problems with the iMac 21.5" right now.
It comes with a HDD or a Fusion drive, as opposed to a SSD. You can get by with the Fusion but sooner or later you will experience some kind of slowdown, and it’ll only get worse down the road.
Also, there are several rumours suggesting that the iMac will be refreshed this year with a new design, a much better Apple Silicon chip and of course, all SSD storage.
So, if you can wait I think you’ll get a better deal, spec-wise. Price is another matter, I know it’s rough in Brazil
If you need a Mac now, I think what @webwalrus suggested is the best approach: Buy the cheaper Mac mini M1 and a monitor. If you need more storage just add an external drive.
While the 21” iMac is available with a Fusion Drive as a bulid-to-order option, all of the default configurations now sport an SSD. As far as I can tell a non-Fusion spinning hard drive isn’t even an option on a new 21” iMac.
My wife’s first iMac was a 2011 21.5”. She now has a 27”. I have her old iMac in my workshop for occasional use. For single tasking it does fine. If you need a lot of apps open at a time it can be limiting. Even a 27” can be limiting when you have enough stuff going on.
I agree with webwalrus. If you cannot wait for the Silicon iMacs, get a Mac Mini and buy the size monitor that you want.
I think that most people who move to a 27" screen from a 21" or 24" think that it is overwhelmingly big for about three days. And then it normalizes in their minds, and they are happy. So if your “too much” refers to the screen size being overwhelming, I would not worry about it. If “too much” refers to $, then I would definitely go the webwalrus route.