The game IS difficult on normal, but money and items can make it a lot easier... and taking combat slower (one or two hard combats a day). The need for money, and time, is part of what will push you into a corruption cycle. This isn't really a gooner game, this is a solid RPG with surprisingly complex interactions with all the skills. Some zones require you to smoke bomb enemies so you can then attack them from behind, with certain spells to get tactical advantage, etc. Knowing the enemies weaknesses and attack patterns is critical.
For what it's worth, the combat difficulty is the same on Hard, just with higher cost for upgrades, and you get a lot more XP for that. With a few Newgame+ skills the game is significantly easier. I still find the underwater section, and the final demon palace, to be TOO difficult for when you are expected to encounter them... unless there's some trick (I never use Earth Magic) to defeating the water based critters.