The "wealth" part of the equation is the total amount you're willing to gamble with. If you have money set aside for frivolities like food, then that wouldn't be part of your wealth as far as the Kelly Criterion is concerned.

The general principle with gambling is never to bet more than you're willing to lose. Kelly betting is optimal in the sense that over the long run, no other system will outperform it. In the short run, it's quite volatile and you can get very low.