Is the 250gb the size of your drive or the size of your data?
If its the amount of space your apps/data/OS are consuming, then you'll need to exclude folders. TM does not do any sort of compression and if you plan on using TM then I highly recommend an external drive that's significantly larger then your internal drive. You want plenty of space to hold the hourly/daily/weekly backups. The power of Time Machine comes when you have sufficient space to allow it to run hourly. Having such a small drive, will mitigate the power and major features of TM.