Tested with VPS on Debian 7 (Wheezy) 32-bit.
update debian packages lists
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apt-get updateInstall squid proxy server and password encryption tool
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apt-get install apache2-utils squidcreate proxy username proxyserver and enter the password
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htpasswd -c /etc/squid/passwd_squid proxyserverrename default squid configuration file
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mv /etc/squid/squid.conf /etc/squid.conf.bakupcreate new config file
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nano /etc/squid/squid.confpaste basic configuration of http proxy with authentication
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acl all src 0.0.0.0/0.0.0.0
auth_param basic program /usr/lib/squid/ncsa_auth /etc/squid/passwd_squid
acl ncsa_users proxy_auth REQUIRED
http_access allow ncsa_users
auth_param basic children 2
auth_param basic realm proxy
auth_param basic credentialsttl 2 hours
auth_param basic casesensitive off
http_port 4129
save new configuration and restart squid service
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service squid restartYou should be able login to proxy server using username proxyserver and your password on VPS IP address and port 4129