So guys, for this to work, my 500GB drive wont work?

I have to buy a new expensive 3TB drive to match the 3TB of data I have?

It just can't start on the cuff backing up data from my new 3TB external hard drive over to my backup 500GB?

I'm not sure I'm willing to buy a new 3tB drive just for time machine when I have an excellent 500GB drive I'm not using.