How do I create a new user with Apple ID on Mac while retaining files and desktop

Well, if you are signed in with your AppleID, anything that is sync’d with iCloud will go away, Desktop & Documents, Contacts, Photos, Music, etc.

For most, but I don’t know about all, you will be offered a choice on keeping the Data or not. I know that for Desktop & Documents that is true. I don’t know about the rest.

You should check to see if Photos in iCloud is enabled in iCloud System Settings or iPhoto Settings. If not, they will remain on the Mac.

If they are in iCloud, I’m not sure what happens. You can log into iCloud.com (your AppleID) and download them to be safe.

For Contacts in iCloud, select all contacts and export them as a vCard (File>Export>as vCards).

I’m not certain about other things.

If she has a separate user account, what is done on that account is independent of what you do on your account. It is like if you each had your own iPhone. You can't have multiple accounts signed into an iPhone or iPad but you can on a Mac if each person has their own user account.

It isn't complicated (I have seen multiple accounts on computers for the past 30 years, both Macs and PCs, and I am just an everyday user) but I think you are over-processing this and that is making it appear complicated.

I haven't set up a separate user account on my computer (I am the only user) in many years but it wouldn't surprise me if when you set it up for her, you simply signed into your Apple Account in her computer user space. You now need to sign out of your account on her space and have her sign in with hers. You should both be there to do this since it will require your account information to sign out.

Read this document to learn how to sign out of iCloud on your iPhone, iPad, iPod touch, Apple TV, or Mac --> Sign out of iCloud on your devices - Apple Support

Read this support article to learn how to sign in with your Apple ID on various kinds of devices --> Sign in to your Apple Account - Apple Support

Now it gets a bit complicated since iCloud populated her user space with your information when you signed into that area with your account. When you sign out of your account from her user space (this does not affect your user space), it will ask you if you want to keep the data that are there. If this is purely your data, then tell it not to keep the data (meaning your photos, your contacts, etc.) If in the past you have been jointly using your account, you can elect to keep the data and she will have to sort through it all and delete the things she does not want. That's the only "complicated" bit.

You have to create new Mac Account in System Settings > User's & Groups. After login to created profile user should be able to log into his Apple Account(ID). It the files are not associated with her Apple ID you have to transfer it manually

She should just sign into her Apple Account in the user she already has. Turn on all the features she wants to use along with iCloud Photos.

Im not sure if I’m missing something such that you don’t think you should do that.

, but from her desktop going to the System Settings page

if you mean from her logged in account on that Mac you go to settings and you see your user Apple ID logged in?

If so, you need to sign out of your Apple ID and then sign in with her Apple ID.