I highly recommend hanging around the city more. There are a significant number of quests to do in town that can help level you up before you venture out. Also, try to steal and loot everything you can. Find/Buy/Steal better equipment-- especially ones that add stat bonus like STR DEX INT, as well as anything that adds to Way of the ____ for your characters.
Get a sword that adds Way of the Warrior, then purchase a skillbook from Aureus that gives a Way of the Warrior skill you don't have. Equip the sword, learn the skill, and then toss that sword if you find a better one (maybe an exploit that will change in the future). Do the same for all of your characters (Arhu has skillbooks for mages and the arrow vendor has them for rangers). You do have 4 correct? You only have 2?? Go pick up some companions (in the library is a mage and in the tavern is a warrior). Rolling with 4 is significantly easier than going with just 2 (unless you've specifically taken the Lone Wolf route).
There are XP bonuses for exploration. Find a house that's locked and find a way in. Find a basement or backroom in one of the locations and get inside. Easy XP bonus for exploration. And you don't need a rogue with lockpicks to do it (try fire, try weapon bashing, try scrolls, etc).
There are some mobs outside the city that are easier than others. Just venture out a short ways and pick off small groups of 1-3 mobs until you're level 4-6. Once you're 6, with a solid group of 4 with decent gear and skills, you can handle anything on the map.
