You will have a yearly naval budget at your disposition. The budget is a function of the base resources of the nation and the proportion of expenditures devoted to the navy. Both of these can vary as an effect of various events in the game.

The base resources will increase as a result of wars won, and decrease when wars are lost. The base resources will also increase steadily at about 3-5% a year as a result
of economic growth.

Your budget will also get an addition from the colonies and other possessions your nation controls. The income from colonies will decrease over time in the game. The effect of this is that, considering the costs of garrisoning your colonies, they might not be profitable by the 1970s.
The naval budget percentage will vary with various events and your response to them. In general the naval budget will tend to rise in times of high tension and be low in periods of low tension.

Your yearly budget will be divided into monthly payments to the navy. Running out of funds is not a good idea, and will tend to upset the finance ministry and lower your prestige. It will also affect fleet morale, as unpaid sailors tend to get surly. You can run up a surplus and save money for future expenses or for building that super battleship. Be aware however that if you have substantial funds in your coffers for long periods, the Kaiser, Prime Minister or finance ministry might find a use for some of those funds.

The world is divided into areas. In each area there are a number of possessions that can be controlled by one of the player nations, or be neutral. Possessions have naval bases and can have coastal artillery or other defenses. The base values and fortifications of possessions can be improved by the player.

Possessions can change hands, most often as a result of peace treaties. In some cases possessions can be transferred in other ways as a result of events. If a player nation acquires new possessions in an area where other nations are pre-eminent, this will probably increase tensions.

Each possession has a value that is used when calculating the budget effect of acquiring or losing possessions. The budget effect of possessions is relatively limited compared to the rest of income. Income from colonies will slowly decline over time. Eventually, democratic nations will tend to grant independence to their colonies.Some possessions have oil, and access to oil fuel is necessary to build oil fueled ships before 1920. After that, oil extraction and trade is assumed to have spread so
that all nations can gain access to oil. However, nations without own oil resources may be subject to fuel shortages. Before 1920, oil may be randomly discovered in new places.

Research and technological development plays a large role in RTW. This is a period of rapidly changing technologies, and as it takes several years to build a battleship, your ships will sometimes be obsolete when they are completed.

You can define a portion of your budget up to a maximum of 12% as spent on research. You should be aware that on values over 10% there is a diminishing return.
There are a number of different research areas, from battleship projectiles to submarine technology and a lot in between. In the research menu, you can shift priorities between different research areas by setting their priority to high, medium or low. Note that these priorities are relative, so setting all research areas to high will not increase research, it will just mean that all are equally prioritized. To prioritize everything is to prioritize nothing, to paraphrase Frederick the Great.

Spending on research will lead to research advances, which will have varying effects depending on the area. Advances in Hull construction and Machinery development will reduce the weights of those components in new ship designs. Other research areas will unlock various technologies to be used in ship designs.

If there are no technologies left to discover in a research field, research points spent there will be automatically reallocated to other areas and not wasted. In other words, there is no need to manually set these fields to low.

In the game, dock size is used as a limit to the largest ship your nation can build and operate. It is
also used to compute the total capacity of your shipbuilding industry.

You cannot build ships larger than your current dock size. Occasionally it is necessary to increase your maximum dock size. Docks take one year to build. Each building step will increase your dock size by between 1000 and 2000 tons depending on the time period. Try to plan ahead; waiting an extra year to lay down your new battleship while you enlarge your docks can be very frustrating. Dock size may occasionally increase by itself as a result of development in private shipbuilding.

Dock size is also used with a multiplier to determine your total shipyard capacity, that is, the total tonnage of ships you can have building. Note that submarines under construction are included in this total.

If you cannot build ships at home, you can contract them to foreign yards. You will then be limited by the building nation’s dock size. This can have a further advantage if your own nation lacks technology or has an undeveloped shipbuilding industry.

The drawback to building ships abroad is that you risk that your ships will be impounded and not delivered if a war breaks out. The risk of this happening depends on the tension level with the building nation. If you have a treaty with the building nation, they will always be delivered. An advantage is that you may gain insight into the technology of the building nation.

You need not design submarines in RTW, they are selected from standardised types. The different types of submarine will be available as a result of your submarine research.The different submarine types are: Coastal submarines, Medium range submarines, Long range submarines, Minelaying submarines and Missile submarines...

Coastal submarines have shorter operational radius, so will only have full efficiency close to your bases. They have limited torpedo capacity and cannot make strategic moves in wartime.
Medium range submarines are the general run of the mill submarine.
Minelaying submarines are much like medium range submarines, but can also lay mines. On the other hand, they have a reduced torpedo load. They have a smaller risk of causing opprobrium among neutral nations in the period before 1930, as mined merchant ships do not inflame international opinion as much as torpedoed merchant ships.
Long range submarines are better at operating in areas where you do not have a large friendly base capacity. They are slightly more vulnerable to ASW attacks than other submarines.
Missile submarines carry anti-ship missiles and will use them when a suitable target is in range. They also have torpedoes.

Submarines will have an effect in the strategic turns, when they will attack enemy merchant shipping. They will also occasionally torpedo warships. The effectiveness of submarines will depend of the number of enemy ships on trade protection and or the number of destroyers relative to heavy ships on the fleet.

Submarines generally operate best in areas where they have friendly bases. They can operate in areas adjacent to areas with friendly bases, but with reduced effectiveness (except for long range submarines).Advances in submarine technology will increase the serviceability and the attack
effectiveness of your submarine.

Submarines will also participate randomly in battles, in proportion to the number of submarines available to either side. In battles, submarines can torpedo ships, and will also get an extra after battle attack chance on enemy ships returning to base after the engagement. In this phase, damaged ships are especially at risk.

During wars you have three policy options for your submarines:
Fleet support means that submarines will primarily operate against enemy warships and only attack enemy merchant shipping in very clear cut cases.
Prize rules means that your submarines will attack shipping, attempting to follow prize rules. The occasional incident that will upset neutral nations cannot be avoided. Your submarines will try to strike a balance between supporting the fleet and attacking enemy merchant shipping.
Unrestricted means your submarines will carry out unrestricted submarine warfare against enemy merchant shipping at the expense of operations in support of the fleet. This will increase sinkings of enemy merchant shipping and may cause starvation and higher unrest level for the enemy. However, it will also anger neutral nations and risk bringing in additional enemies against you.Submarines will have a sharply reduced effect on enemy merchant shipping if you
are blockading the enemy (enemy merchant shipping is assumed to have been reduced
to a minimum by the blockade).

You can build coastal artillery batteries in the same way you build ships, except that you do not design them and can only chose between predefined types. Coastal artillery must be built in a specific possession.

Coastal artillery will be assigned randomly in proportion to their numbers to positions on the coast of the possession where they are located, and will be available in battles at that location.

Coastal artillery positions will also increase the number of local minefields in the vicinity of the battery.
With time, coastal artillery emplacements will gain a few anti-aircraft guns.Late game, you can also install coastal missile batteries.

Ships in commission can be put in varying states of readiness, which will affect their maintenance costs, but also their readiness for war.Ships can be in the active fleet, which have the best trained crews and are immediately available for service. Ships in the reserve fleet are manned by reservists and will take time to get to full effectiveness.Ships that are mothballed have poorly trained crews and will and take substantial time to get to full effectiveness.
New ships and ships just mobilized will be placed in “Working up” status until they have decent crew quality. They can be changed to another status by the player (but not back). Ships in working up status will not take part in battles.

Ships under repair will cost about 2 times the active maintenance cost. This is to reflect the cost of making the repairs. Ships in Mothballed status will have repair work halted and will not incur the extra cost. This can be useful if repair work causes high costs that crowds out other important ship construction. Ships under repairs that are put in mothballed status will have an H as notification in the ships list, as repairs are halted. In some situations it might not be worth the cost to repair an old ship, and it might be an attractive option to scrap it instead. It is a good idea to consider taking the opportunity to rebuild damaged ships, as that will enable some savings and use the repair time to improve the ship.

You have the option of setting special training for your crews. This will let you focus on some tactics or aspects of naval warfare that you deem especially important. Your choice of special training should consider the types of ships you build and the type of battle you expect to fight.
Each special training subject selected will increase maintenance cost for your ships. Once you start training, it will take 12 months to achieve proficiency in a subject. You have to keep on spending on training to keep the benefits. The benefits disappear immediately upon stopping spending on that type of training.

The different kinds of training are:
Gunnery: Gunnery training will give your ships 10% better accuracy when firing
guns. The cost is 30% increase in maintenance.

Night fighting: This will give your ships a bonus when spotting enemy ships at
night, and less chance of hesitating before opening fire at night. It also gives a
10% accuracy bonus at night. It will cost 20% increase in maintenance.

Torpedo tactics: This will make your light forces more alert when carrying out
torpedo attacks, quicker to react on flotilla attack orders and give better hit
chances when firing torpedoes. The cost is 20% increase in maintenance.

Damage control: This will increase the proficiency in damage control of your
crews. They will reduce flooding faster and put out fires more effectively. The cost
is 20% increase in maintenance.