Time capsule would certainly be more convenient.

I'm not sure what router you have, but you may be able to just use a USB or networked ethernet hard drive and use Time Machine wirelessly via your current router?

I know it used to work with the Airport Extreme Router and I think other non-apple routers. Originally the feature wasn't there, but then after a lot of complaints, I recall that the feature you're referring to was added. Here is a link in case you're interested.

http://forums.macrumors.com/showthread.php?t=814762

Rich