It is possible to move the whole home folder to an external drive. I did do this in the past, although it should be noted that this only seemed to work reliably on disks that were not encrypted.
If the Mac is located somewhere that is relatively secure (and not too many people have access to it) then moving the user’s home folder to the external drive might be an option to consider. If you are planning to secure the drive with FileVault then this is not something I would recommend from my previous experience.
FYI - I do know from experience that Dropbox support can claim “We only support Dropbox on the boot drive” even though it will easily let you move it to an external. I responded that few people have 2TB internal drives, but they didn’t care.
Of course, my actual problem with Dropbox had nothing to do with it being on an external drive, it was just a convenient way for their “help” support desk person to give up after I had stumped them.
I thought Applications could run from an external drive, but would save settings within the Home folder.
Depending on the email program, the storage can be moved to the external. I used Postbox on my Mac mini and that can download all emails to an external drive, whereas Outlook and Mail download it specifically to the ~/Library folder. And on the Mac, they download it all (Windows Outlook can download a specific amount of data which is helpful).
My 2cents: I’d rather invest on at least 1TB storage than on CPU oomph or RAM size. The new machines are screamers, and the internal storage is fast, so in case you need disk paging, it will not be that noticiable.
Most applications can run from anywhere, and most will always store information in Home folder.
However, there are some weird restrictions.
1Password refuses to work on a web browser that is not installed in /Applications/.
Applications that are installed from .pkg files usually need to be installed to /Applications/.
Same with apps from the Mac App Store.
But otherwise… yes.
When I was dual-booting my MacBook Air, I had some apps installed to a partition at /Volumes/Applications/ so I didn’t have to update them twice. But it was a pain and I eventually decided it wasn’t worth the hassle for the ‘help’