How to store home and applications folder on another drive I am interested in setting up my home folder and /Applications in another hard drive like you can with Linux. 

Is there a way how to do this? I would also like to make sure that it won’t cause any problems on updates/reboots providing I have the external drive connected.
Moving your Applications folder to anyplace BUT "/Applications" can cause issues with certain apps, particularly when it's time to update. It may work with a symlink.

The home folder is much easier. Make a new admin user and log in to that. From there, move your home folder to the location you want. Then open up System Preferences, and click on Users &amp; Groups. Unlock the pane, if locked. Right click on the user who's home folder you are moving and choose "Advanced Options".

From that sheet that slides down, you can choose the new location of that user's home folder. 

I've used this in the past to have the OS and Applications folder live on an SSD boot drive, while the home folders live on a larger HDD.