Sub-Domain Configs

I’m looking for some help regarding the Sub Domain configs.

I’m going to be honest I’m still learning NGINX and it’s a nightmare haha.
This is a pretty simple question really, if I was to have lets say a domain that is “website.com” and I want to have a sub domain of “test.website.com”.

Would I create a separate file for each of these within the “/etc/nginx/sites-available” directory?
This is how I have it setup currently but I’ve seen people use things like:
server_name website.com *.website.com

The main part of the domain uses the same machine as NGINX, but the subdomain is a reverse proxy.

Thanks in advance,
~Jordan