Short answer
Start with your venue's maximum capacity, then build the list in tiers and cut by category. This gives you a realistic number before you worry about money or space.
Begin by asking your venue for the maximum number of people it can hold, both for the ceremony and the reception. This is your hard ceiling. Next, write down every person you feel you must invite, then sort them into three groups. The first group is non-negotiable, such as immediate family and the bridal party. The second group is important but flexible, like close friends or colleagues you see regularly. The third group is everyone else, such as distant relatives or work acquaintances.
Once you have these tiers, count the first group and see how much room you have left. Work down the list until you reach the venue limit. Be honest about who you actually want there. It is also wise to check with your parents early, as they may expect to invite their own friends or relatives. If you are having a religious ceremony, remember that some places of worship have their own seating rules, so ask them too.
Finally, add a small buffer for plus-ones and babies, but only if your budget and space allow. Remember that a smaller, fuller room often feels more welcoming than a half-empty hall.
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