506. See Things as they Really Are.

One definition of a wise man is one who sees things as they really are and not how he would like them to be. This is called the faculty of discernment. Avoid fooling yourself and remember that self delusion is the worst form of delusion - you yourself will always be the easiest person you can fool. Self-delusion is the most widespread mental illness that there is and it is the root of serious loss of sanity. Strive always to see things as they really are. You should always look below the surface in any situation and try to see what's really going on. If you don't like what you see, devise methods to make things how you would like them to be, but never fool yourself into thinking that they are as you would like when in fact they are not.

179. Fantasies

Fantasies are distorted forms of vision. They are always distorted because they involve the twisting of perception into unreality. Actions that stem from such distortions are the reactions of those who "know not what they do."

Such fantasies are unhealthy and lead to self-delusion.
It is important to distinguish between unhealthy fantasy and Imagination and Creativity; these, of course, lead to a better life.