Am I supposed to 'grind'?

[ChrisG]

Yes the enemy lords are very powerful especially in the start of the game.

Keep atacking bandits, peasants and merchants (they pay you first,then you can fight them and sell the trophies) until you get to higher levels.

As for the purchases you have a restricted number and type of troops.
The more experience you get,more and better troops you can recruit.

The base of your army will be the irregulars.

I am at level 15 and i have 10 irregulars(swordsmen and archers)
5 militias(sword and crossbowmen),3 mounted sergeants and 1 unit of dismounted knights.