How do you determine which expenses need your attention ?

My parents have taught me one thing - don't think much about the price tag of anything that is necessary for you or you like it - rent, food, clothes, electronics (when needed), memories

I add to it this way - if I like something I'll buy it, but on one condition that I should get the money's worth out of it with my usage. Most things get rejected outright. So I mostly end up buying things that add value to my life.

I think one get's a general sense through their own spending patterns on this

I can speak only for myself. Assuming a 1Cr NW, I would make justify one time spends above 5K rupees basis how much utility they give me. Apple Watch is great, a concert I would think about. A health check up that costs 5K is okay, but a one time drinking night where I spend 5K pinches

Tough to summarize with a formula tho

I do value of the expense. Can be low money high value add, or high money low energy/attention high value - these are bought instantly

Others obviously are impulsive, you don't put your brain there 🤭

Not speaking of high level stuff. I spend as much as I can on cheap thrills.. For eg: drinking good filter coffee at a famous joint costs me 15-30rs. Walking to the stall, drinking coffee and enjoying the process itself doesn't cost much but gives more happiness..

Spending on such cheap thrills is something I'd always do irrespective of budget or anything.

I think in terms of value they add & the emotions.

For recurring expense, i think threshold should be on in hand and not net worth.

For one time definitely look wrt net worth. E.g. marriage. Is it worth doing it?

Mathematically optimal would be comparing percentages which you have been doing but you have observed that this is not convenient.

I have faced this and I settled onto an approximated solution which is not mathematically precise but practical to apply in daily life. What I do is on the first day of my new income source, I decide my max % barriers to incoming category of expenses. Depending on the type, frequency, significance and urgency of an expense, I decide whether the barrier will be as a % of my incoming cash flow (most expenses) or a % of my liquid networth (the largest expenses). This is a subjective premise which is personalized so I'm not going into depth.

Once your barriers are set, just assign max number of digits (in your currency) to an expense category. Example my annual income is in 6-digit $, my annual total expense is $50k, now my monthly expense cannot exceed $4150 anyhow otherwise my annual expense limit would be breached. Now my weekly spend limit comes to be $1037. I'll round this off to $999 for margin of safety and now I'm good to go. The only thing I've to make sure is my weekly spending stays as a 3-digit number (stringently). That's easy to track and manage. And that makes my daily spends to be $142 which I can try to squeeze under $100 as a 2-digit number (liberally).

Similarly, if I take a taxi, order food, tip someone, etc, I've to only make sure that I stay approximately within the correct number of digits range for any transaction. Likewise, if there's a purchase of say $40 and I end up accidentally spoiling the item, I can repurchase it and still wouldn't mind because I'm still spending only in double digits. The moment the digits threshold is crossed (which happens less often), you should get alerted and start considering whether the limit breach is being justified by the return on expense and whether that limit is liberal or stringent. This way you calculate way less often while smoothly implementing your financial safety checks.

All of them need your attention. Just don't overthink on them.