Somebody should mention farming, the least spectacular but steadiest way to produce income. The whole "farming leads to squalor" idea needs another look.
Short answer: territory
You need a lot of it. In a Turkish campaign, I've built little save for roads and ports but have about 10 territories around turn 20 and make around 4k a turn. Within 5 more turns I should have another 3-4 territories and between the loot from sacking and the new territory income I should be good.
Another thing I found helpful is only concentrate building to 1 major town and 1 major castle. Other then roads and ports, keep your other territories small and not that advanced. This will allow for minimal garrisons and keep squalor down to a minimum. It seems if you try to build your small territories too fast (through farming, trade buildings, etc.), it causes a lot of squalor and corruption which ends up causing them to buckle under their own weight if grown too fast. Another positive to this is that you can really give your 2 major troop producing settlements (the castle and the city) a huge boost in technology.
In the Turkish campaign from above, I could produce Saracen militia at my capital on turn 18. In another Turkish campaign where I tried to build up all my provinces, I could not produce Saracen militia anywhere in my empire on turn 60.
Well, trade makes tons of money. Good port cities are nice to have. I usually get communal farming, and that tends to pay for the garrisons in cities.
Territory is another one, the more terrirtories you have, the more profits you will make. I have noticed money being more tight in M2TW too. My solution has been to seek the large enemy cities, and then to sack them. In Egypts area, if I am a catholic faction, I use my ex-crusader armies to run around sacking cities and forget about holding them until they are at least 50% catholic.
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