Pen and paper
A nice 5mm grid and fineline markers in red and black. Great for trying out simple stuff quickly since I don't feel a need to make it look perfect on paper. Prototyping on the computer is nice, but it can take a lot of time since I often end up obsessing over details.
I've used Photoshop for about 20 years and feel pretty much at home there. I tried out Gimp because I like the pricetag and I like that it's compatible with Linux, but I didn't much like the actual program.
Actually, I haven't used it on a watchface yet, but I know I will at some point. Making shapes is so much easier there than it is in Photoshop.
For making custom fonts. I've got a few in the pipeline that would look nice on a watch. To me, a good original font can really give a project that extra boost while common fonts bore me. Yeah, I'm a bit of a font snob...
I will use other tools too if they are useful, but the above are the basics.