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Setting up SQL Server in External Drive

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Hi,

I installed SQL Server 2012 on my latop and tried to restore a database from backup - only to realize I don't have enough space left in my drive.  I am wondering if I can use an external drive to solve the problem. 

I searched around and gathered that it is possble at the cost of performance (obviously USB being much slower than internal SSD. This is for development only so performance is not much of an issue). What I don't understand is how exactly it is done- is SQL Server itself installed on internal drive and the database resides in external drive?  Or can I install SQL Server on external drive by specifying a path on external drive at installation? (I realize that some things will have to be in C:\ but this is no big issue to me because I just need to make sure the external drive is plugged in before starting SQL Server)  Is this possible?  If SQL Server is on external, would it still be on localhost? 

I'm a novice so I would appreciate a simple and straight forward answer even if it seems to be a dumb question.


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