I assume by "Nexus toolkit" you mean Nexus root toolkit? NRT is pretty much the simplest way to update and root Nexus devices. It will tell you your current Android version, and has (usually) one-click buttons for rooting and unrooting. Just update to the latest version of NRT, run it, and plug in your phone.
The catch is that beginning with Android 6.x (Marshmallow), Google implemented a more secure updater. The update process now first checks all system binaries to make sure they are stock before proceeding with the update. Root and a variety of other root apps like xposed modify these system binaries, so the update will refuse to install.
For minor .x updates, you can usually get away with just installing the new system files (doesn't use the installer, just copies new files over existing one). NRT has an option to do this. But for major updates like 6.x to 7.0, it's recommended that you back up your data, wipe (factory reset), and install 7.0 fresh. You can unroot 6.x, and try the 7.0 update. But may run into problems with certain apps which haven't yet been updated to 7.x. In particular I'm not sure how well xposed will transfer over since I stopped using it with 6.x (took them almost a year to update it, by which time I had moved on).
NRT has buttons to assist in backing up certain data. But since the Nexus devices lack microSD cards, you have to be careful to backup extraneous files like downloads, photos and videos you've taken, etc. Stuff that isn't picked up by normal backup apps (which usually only cover SMS messages, phone call logs, system settings (which you shouldn't try to restore between major updates), and app data.