Time Machine: Can I use a smaller external hard drive with larger internal?

Can I use a 250G external hard drive with and 500G unfilled internal drive with time machine? Or will time machine require I a 500G? I don't plan on filling the internal drive for a long time and don't want to buy a new external drive right now.

Yes, but you are very likely to get in trouble very quickly.
The problem is that TimeMachine saves multiple versions of any file modified, and if that file happens to be large, you can quickly fill up your TimeMachine drive such that it is throwing away older versions faster than you would desire.
Also if your boot drive's storage usage gets even close to the 250GB external drive's capacity, TimeMachine is likely to stop working.
If possible, I would suggest an external drive that is twice as large as your boot drive, or at least 1.5 times larger.
I guess you could repartition your boot drive so it is smaller than your external disk so you would be less likely to use more space than could fit on the external.
Personally, my opinion about backups is that much of my data is impossible to replace (family pictures, etc...), and spending money on backup hardware is a small price to pay for securing those memories. I also try to have it backup in more than one location in more than one way.

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    Message was edited by: kostby

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