I use multiple VMs, and group things either by security layer or by purpose.

When organising by purpose, I have a VM for reverse proxies. Then I have a VM for middleware/services. Another VM (or multiple) for database(s). Another VM for backend/daemon type things.
Most of them end up running docker, but still.

Lets me tightly control access between layers of the application (if the reverse proxy gets pwnd, the damage is hopefully contained there. If they get through that, the only get to the middleware. Ideally the database is well protected. Of course, none of that really matters when there's a bug in my middleware code!)

Another way to do it is by purpose.
Say you have a media server things, network management things, CCTV things, productivity apps etc.
Grouping all the media server things in a VM means your DNS or whatever doesn't die when you wiff an update to the media server. Or you don't lose your CCTV when you somehow link it's storage directory into the media server then accidentally delete it. If that makes sense.

Another way might be by backup strategy.
A database hopefully has point in time backup/recovery systems in place. Whereas a reverse proxy is just some config (hopefully stored on GitHub) and can easily be rebuilt from scratch.
So you could also separate things by how "live" the data is, or how often something is backed up, or how often something gets reconfigured/tweaked/updated.

I use VMs to section things out accordingly.
Takes a few extra GB of storage/memory, has a minor performance impact. But it limits the amount of damage my dumb ass can do.