How do you determine how much to spend on speakers

I would spend more on speakers and power amp basically.

My suggestions:
1. Speakers: $2000
2. Power amp: $1000
3. Preamp: $800
4. Digital Source (CD player or Transport+D/A): $800
5. Cables: $400

I would recommend to purchase mint condition used stuff with your 5k budget. Good luck!

But I always buy used as much as i can. I just dont think it makes sense to have a limited budget and loose 1/2 of it when you want to upgrade...

I spent 600 on my Berning TF-10 preamp, 600 on my Parasound CDP-2000 Ultra, 400 on a Kinergetics Chiro C200 (140w/ch), and 600 on JBL L-96 speakers... and the cables are Vampire Wire copper and DH Labs ST100 hybrid (about 120 in cables),,,

What you get in a certain system is not really reflected in retail prices,,,I think that speakers squeeze a lot more performance for the dollar than the electronics,,,so to say you need 3K amps to match 5K speakers, in my opinion is nonsense,,,

There is a leveling curve at some point, and when you get some good Spendor, AudioPhysics, ProAc,Paradigm, PSB, or used Thiel, Hales, or whathavya, you will have enough speaker to be able to enjoy whichever electronics you choose.

I found that actually I rather spend (just realized it lately) on a preamp.

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.