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For this, if you make a settler, you lose a population from the city you made it, but you don't get a penalty or something
1) Close to Mountains for Holysite boosts, Science boosts, or if you are looking to create an aqeduct district to get more hosing
2) Close to luxury resources so your people in your city are happy and well fed
3) Close to your enemies if you want to start a conflict. Some civs, such as Poland, relish in this by allowing you to absorb times into your own my putting down an Encampment district.
4) Somewhere with a lot of space to exand. The larger the area around the city, the more useful tiles you can gain. Even farm tile improvements can be better than settling somewhere with abundant, unbuildable mountain tiles.
5) Somewhere along the coast if you want to conquer the seas!
That is about it really. The best course of action I can give you is to look at the surrounding resources and generalize about the future of the city. For example, if you settle with lots of hills, you'll probably have that city become your main production hub as the hills are minable and give your city lots of production. Hope this helped!
What you need to know about it is mostly how luxuries work. Luxuries give 4 amenities in total (6 if Aztecs), and are able to give 1 to any city (meaning, not more than 1, so if you have say 2 cities and 2 luxuries both cities get 2 amenities from luxuries, rather than 4). If you have more than 4 cities it will spread luxury amenities out throughout your cities to best try to keep people happy. Also of note is that there's no amenity usage for a city with low population, whereas they continuously go down as a city gets larger.
The other main penalty is that the cost of building districts depends on your number of districts in your entire civ, which includes city centers, so lots of cities will make districts more expensive.
All in all there isn't really a whole lot of reason to not go wide (and you're definitely losing out when you have less than 4 cities since part of your luxuries will be going to waste). Also early warring can get huge gains since capturing Settlers now gives you a Settler instead of converting it into a Worker/Builder, which also makes it generally preferable to capture Settlers instead of cities since you then don't have to deal with penalties associated with taking cities.