It depends. In my opinion, it is really hard to over prepare for a game because all that extra content you create can still be useful to you later on, even if you don't get to use it in the session you planned. That being said, if you are spending hours writing micro-fiction that is mostly going to be ignored or glossed over by your players, maybe you should dial it back at bit.
In my games most of my prep work goes into making sure I have my monster stats grouped by encounter and I know the basic motivations of a handful of NPCs that the party might cross paths with. My worlds are pretty open and generally Forgotten Realms-ish, so I have a solid idea of how the bigger cities function, but the smaller towns are more fluid with far less detail.
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"The mongoose blew out its candle and was asleep in bed before the room went dark." —Llanowar fable
Mainly, it depends on how much you're able and willing to make up as you go along. If you're doing less than you need for that, you're underpreparing. I just open D&D Beyond and make sure I know what level the party is, what alignments the PCs are (if I remember, which I quite frequently don't), and what's already happened.
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"Any society that would give up a little liberty to gain a little security will deserve neither and lose both" -- allegedly Benjamin Franklin
Since the optimal amount of prep for a DM is a highly variable thing from one DM to the next, all I can say is this:
If you feel like you have too much to make up on the fly while in the process of running your session, you are under your optimal amount of prep.
If you feel that way even though you have more stuff prepared, but that stuff was all contingent upon some thing happening that didn't end up being what happened, or if you just don't ever use up all of what you prepared even though you thought it was only one-session-worth of material, you are preparing more than is optimal for you/your group.
The key, in my opinion, to finding your optimal prep amount is to start by preparing what feels like the absolute bare minimum to you, and run that session. If you feel like you weren't doing well because of a lack of prep, add a little bit more prep to next session. Repeat until you reach a point where you used the majority of what you prepared and didn't feel like you couldn't handle the rest on the fly. And even then, it's likely that your optimal amount of prep will change over time and with any changes to the group of players participating in your campaigns.
Several ways to get them there. (For instance, if you want them to confront the guy in the creepy house about the disappearances around town, you should have multiple NPCs talking about the guy who lives in the creepy house, the disappearances, how they spotted the guy from the creepy house talking with someone who has gone missing... etc)
Another place the characters might go
Several ways to get them there (and optionally, some way to connect this side mission back to the creepy guy. A deed to the creepy house? or the person who was spotted talking to the creepy guy, turns up again as vampire? stuff like that.)
Maybe some maps, pre-planned encounters, pre-rolled loots, etc.
Some type of record of where your players have been.
Most of the rest of prep work goes into building your DM station so that you can answer questions on the fly. Anything else is gravy, and completely up to you.
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Where's the happy medium in between the two?
It depends. In my opinion, it is really hard to over prepare for a game because all that extra content you create can still be useful to you later on, even if you don't get to use it in the session you planned. That being said, if you are spending hours writing micro-fiction that is mostly going to be ignored or glossed over by your players, maybe you should dial it back at bit.
In my games most of my prep work goes into making sure I have my monster stats grouped by encounter and I know the basic motivations of a handful of NPCs that the party might cross paths with. My worlds are pretty open and generally Forgotten Realms-ish, so I have a solid idea of how the bigger cities function, but the smaller towns are more fluid with far less detail.
Mainly, it depends on how much you're able and willing to make up as you go along. If you're doing less than you need for that, you're underpreparing. I just open D&D Beyond and make sure I know what level the party is, what alignments the PCs are (if I remember, which I quite frequently don't), and what's already happened.
"Any society that would give up a little liberty to gain a little security will deserve neither and lose both" -- allegedly Benjamin Franklin
Tooltips (Help/aid)
Since the optimal amount of prep for a DM is a highly variable thing from one DM to the next, all I can say is this:
If you feel like you have too much to make up on the fly while in the process of running your session, you are under your optimal amount of prep.
If you feel that way even though you have more stuff prepared, but that stuff was all contingent upon some thing happening that didn't end up being what happened, or if you just don't ever use up all of what you prepared even though you thought it was only one-session-worth of material, you are preparing more than is optimal for you/your group.
The key, in my opinion, to finding your optimal prep amount is to start by preparing what feels like the absolute bare minimum to you, and run that session. If you feel like you weren't doing well because of a lack of prep, add a little bit more prep to next session. Repeat until you reach a point where you used the majority of what you prepared and didn't feel like you couldn't handle the rest on the fly. And even then, it's likely that your optimal amount of prep will change over time and with any changes to the group of players participating in your campaigns.
Going into a session you should have:
Most of the rest of prep work goes into building your DM station so that you can answer questions on the fly. Anything else is gravy, and completely up to you.