How do you determine how much to spend on speakers

Krazeeyk-
I think your suggestion to pick a target budget for your system and stick with it is wise. There is a lot of flexability within that structure, and I think being decided upon one or two guidelines in a new venture will relieve some of the confusion that comes with so many choices. Ultimately, the value you achieve in your system will come from honest evaluations of what you hear. Synergy wont be achieved by following any one kind of recipe, even as all of the advice you have received from the posts above are excellent. My advice-keep an open mind. set your budget-consider the advice you have gotten, and then break with everything but that which your ears tell you works the best.Finally, be honest! This is your system and its ultimate value arrives in the enjoyment you derive from it.

As much as you've got! *s* Seriously, I don't actually believe that, but in my experience you have to get over $1,000.00 to get into what I consider some of the best speakers you can buy....Spendors or Harbeths. Then it's simply a matter of how big both your room and budget are.
It really doesn't get much simpler than that. Try some,
then try some others and see for yourself. Music, plain and simple.

Listen to lots of live music, then start demoing speakers that are attractive to you IN YOUR ROOM! After all, you have to live with them, even you, like most of us, listen with eyes closed and lights dimmed. Start creeping up in price, continuing to redemo the previous favorite, until you arrive at a price/performance pair you really like.
In my 2 ch ref system this took a year, starting with my vestigial home-made 2-ways through Paradigm Monitors, Thiels, Aeriels, 803N, Fidelios, and finally a demo pair of Parsifal Encores. Ok, that was a quite unrealistic path for most folks, but I'm into these for life (I'm 51, and we FrancoAmericans die young.)....
The second recent go-around concerned our HT system, where I demoed a bunch of 5.1 sub/sat systems, eventually going for the honest midrange of an affordable ($1400) Spendor S3/1p +SC3 front trio. For Ellen's kitchen system the $199 Onkyo CR305TX minisystem, bookshelf-mounted, was a no-brainer. Likewise a leftover pair of Polk whatevers from two years ago serves the bedroom TV exceptionally well.
Hope you're getting my drift. You set your musical priorities and go from there. I always start with the best transducer-in-the-room (loudspeaker), given the source(s), and then amplify appropriately. Cheap Canare Star-Quad cabling is great, except for the 2ch ref system. Try to be really patient, listening objectively. Sometimes reading while listening, or listening from an adjacent room will give you indirect cues that otherwise aren't recognized because you're trying to get analytical. Females are very helpful for sorting out upper octave stuff, too. (My 17yr old daughter speeds up my Steinway treble voicing immeasurably. Same with interconnect and my DIY PCKit comparos.) I just realized that this thread is TWO YEARS OLD!...Happy New Year AGAIN everybody.

If I have 5K, I would spend it directly in the following components:

1.5K on a pair of Merlin TSM-Milleniums
2K on a sort of integrated, I would vouch for either SS or integrated, the Merlins are efficient so even integrated from 25 Watts Class A would do, I think that can focus of an integrated from Pathos....around 2K usedor 1.K on a 47 Labs Shigaraki Integrated (20watts SS), with a great drive and excellent midrange
or 1.5 K on a used 47 Labs Gaincard integrated with one source input....(25 watts) the best watts according to many fans.
1.5K on a DAC converter+DVD transportCables, you choose, you can get several feet of 47 Labs OTA cables...that work, rather well.

I am not interested in arguments about the merits of spending xx% on this and xx on that, the fact is that you need a set up As Solid As Possible NOW, instead of thinking about some future upgrades.

The main components need to be solid in performance right away.

DVD as transport is perfectly fine for now
I guess you can focus in two ways of dealing with the digital front end issue...Either afford the best Transport you can now and the rest in a DAC or vice versa.

With a set up as I stated about, I doubt you would need to feel the urge to upgrade for a long, long time.

I believe in maximum sound NOW and not LATER.

Krayzeeyk (Curb fan?),

Here's my advice:

1. Speakers make the biggest difference. Spend the most money here.

2. Cd source is almost as important. Spend the next largest amount on the cd player.

3. Amps are amps after the first $500. Sound improvement is in the smallest increment here. Golden Ears say otherwise, but for the rest of us...Of course, amps have a very high "cool" factor that might lead you to spend your cash here. Be honest with yourself, if cool factor is important spend more money on your amp.