How do you determine how much to spend on speakers

If you spent approx $1k on source, 2k on electronics (either an integrated, or separates) and 2k on speakers, you could have a pretty great sounding system. You could probably get a better integrated in your price range than separates (unless you buy used), but your upgrade path becomes more limited; i.e., you could get a separate, better power amp, but then you are using the preamp of your integrated to run it, or vice versa.

If you don't think you would want to (or could afford to)upgrade for awhile, then the better integrated might make more sense. There are some great ones out there.

But don't cheat the rest of your gear just for the sake of more expensive speakers. There are some very fine new speakers up to 2k that you could definitely run with electronics even 3 times as costly. If you enjoy the sound of the speakers, you'll only enjoy them more as you improve what comes before them.

My suggestion :

$2k speakers (inc stands if bookshelf/monitor is your choice)
$1500 amp (integrated may be best at this price)
$1000 CD (probably you can get away with less than this)
$500 cables (much less if you make your own)

I definitely wouldn't splurge on speakers ... they'll only highlight your savings elsewhere.

Also in my opinion $5k is all you need to spend for a CD only rig UNLESS you're primarily into classical/jazz music and are prepared to search out audiophile recordings OR are driving a big room to high SPLs. Most rock/pop CDs are not engineered to a quality to justify a more expensive setup. So I wouldn't be too quick to upgrade in the future.

for my system, the biggest sonic improvements came from the speakers, followed closely by the amplifier, then the preamp, then digital source, and finally cables, tweaks, etc. i don't understand why people tout the CDP as a critical link. imho, there are few audible differences among CDPs below $2k (and more in some cases). you're much better off buying a cheap CDP and throwing that extra $$ into the speakers or amplifier.

I'd lean more toward the speakers. My own view is that the quality differential on electronics has shrunk substantially in the last two decades. By choosing carefully, you can cut your budget in half on source and amps and not lose much. You can't say the same about speakers. (Or analog gear, if that's your game.) Also, you shouldn't choose an amp until you've chosen your speakers, because you want to be sure you're buying enough power. And wires are something to play with after you've assembled your system, not while.

Spend the most money on the speakers, only if you are serious about upgrading the electronics later. Speakers make the biggest difference in your system. The differences between dynamic cone driver, dynamic cone driver with ribbon tweeter, planer and electrostatic speakers are bigger than anything electronic. Of course, you have to buy the speakers that match your room and taste.

The GIGO argument is weak because a $500 or less (used) cd player does not put out garbage and is in fact closer than you think to the megabuck cd players. The GIGO argument was valid when it came to turntables and cartridges back in the '80s and computers. Not today with cd players.

Furthermore, Speakers are the not that easy to upgrade because they can be difficult to ship. Most people I know rarely buy used "big" speakers on Audiogon. Electronics are generally easier to ship, so experimenting is more convenient.