People want to measure the progress of their wealth-building journey. While calculations tell an isolated part of your story, you are so much more than any number could hope to explain. Yet, it's still useful to have a baseline to ensure you're moving in the right direction.
An important metric is obtained by considering the value of all the assets of worth that you own. Take the total value of all those assets and subtract the total value of all debts you have. This value gives your net worth and reveals some interesting information.
The value itself gives you a snapshot of how much of your wealth you control. The direction from zero tells you if you're moving towards wealth or debt. While the distance from zero reveals your free cash flow and the rate at which you are currently accumulating wealth or debt. Net worth greater than zero can arguably be considered wealthy. But that doesn't tell the whole story because the stability and extent of that wealth are very subjective.
I tend to tie wealth to financial independence, which I recognize as a point when a person or community is generating enough assets to cover all necessary expenses for several decades without a need for employment or dependence on someone else. This definition frees us from a linear path to wealth and allows us to strategically design our lifestyle as a wealthy one.
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