Characters, Settings and Realism

Today I was sitting at my computer, like which is usual routine had my cigs and coffee close to hand and after a quick check of email and Facebook both of those are such evil entities they are really bad for distractions mentally. Was about to plug in my writing playlist and had my ARC (Advanced Readers Arc well in this case Writers Arc) When I stopped cold in-front of my writing program and went shit I can't see my characters nor their setting its a blank! Sure I had pages of written material but the complexities that I had gotten myself into were beyond scary.
Then I remembered something my Grade 9 Creative Writers Teacher said in class: "Write what you know, your characters and setting will lack realism if you don't." Now your thinking this should be obvious and easy, Just you try it after 2 weeks of typing out characters and an storyline and making it flow and make sense so that an infant could understand it!
So scratching my head I said to myself WTF am I going to do I felt anger and all other emotions boil to the surface and an feeling of being in a leaky life jacket floating on shark infested waters with their shadows lurking below me just waiting to chomp on my ass. How do I fix this what? Do I gota scrap everything and start from step 1 my publisher would become an psychopathic serial killer that would make Jason Voorhees look like Mary's lamb.
I was at a lost of words and thoughts on what to do....
So the very first thing I did was take a couple of deep breaths then I plugged in my playlist and cranked Nightwish and stared at the computer screen... Still nothing.... Then I thought what if my characters lived in the same city as I actually did in reality... would it work for realism what if I changed the setting would I loose that realism. Taking literally the concept of write what you know I discovered to my distress that was more complex than I could image. I definitely couldn't even visualize the Gorgonus Sisters lurking in my actual backyard! 
So I began to panic then I had a simple thought They don't have to fit in exactly, besides it's not exactly none fiction that I am writing they can be inspired by events, places, people and even  personalities of house hold pets that I have had throughout my life. So with great caution and slowness I opened up my character background pad on the computer and copy pasted what I wrote of each of the three sisters to a brand new pad and stared at what I had written.
Then I had another what I would call Light Blub moment and rushed to one of my favorite places in  my house The bookcase. Many different Urban Fantasies stared back at me From Yasmine Galenorn's Otherworld Series to Jeaniene Frost's Night Huntress Series. I paused and grabbed afew of my favorites off the shelf and began reading.
I started reading a chapter here and a chapter there from a book here and a book there. Not reading for the joyment of engrossing myself into the storyline but looking at what some of my favorite authors had done creatively. Yes, like what my Grade 9 teacher said they wrote what they knew placing their characters in settings similar to their actual cities I know this because I checked the back of one of the books and noticed the city was the same as where she placed her characters. But I also noticed that my favorite authors were putting more description into their characters and that they were most likely using a heavy dose of creative licence for setting. "How could they get away with this?" I thought to myself and the answer was simple!
While a setting might be inspired by say for example the local coffee shop or the authors favorite park they didn't feel the need to become stuck in the black and white reality of those places and used them only as an very very loose frame to start off with.
The important thing to all my favorite authors were their characters, I had become lost in the framing of the concept and not in the creative process. It was at this point I felt like smashing my forehead against the computer desk. And looked again at my characters and got to work!


So a new rule I made for myself:
Don't be so exacting! realism will occur or it won't and if it doesn't scrap that area and start it fresh. Don't look at the little things too much leave that intil later on in a rewrite. You can lead your characters to water but if you haven't created the water to begin with they will drown in you the authors stupidity not in their own because they are neither intelligent nor stupid.