Well at this difficulty level money is a big problem so be carefull in what you invest.
First thing when you enter a new map is explore and gather all the bonuses you can reach - leadership, runes, cristals, etc, avoiding monsters for later. Then attacking the weaker ones - if you suffer more than 10% casualties reload and try to fight somebody else.
I used diplomacy a lot even though i played a knight, i have about 10 - 12 different creature types in different castles and i've just finnished the dwarven islands - i buy one of them and let the others stack up. Also some creatures are more worth having in the army than others. Of course the game might randomize some artifacts and give you bonuses for other units but units like the inquisitor, cannoners, royal snakes ( with the frog wife in frog state ) are excellent to have in the army.
Spells - Hypnotise and Geyser are great till this point in the game ( like i said, at the end of the dwarven islands ). Haste, slow, demon gate are also very good.. maybe i'll think of more later
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