Hey Shannon, making a file geodatabase is easy. Simply right click in the ArcCatalog window, and choose new-->file geodatabse, and then name it as you would any other folder. You can import your shapefiles and rasters into there by right clicking them and choosing export, and you can save the results of tools or geoprocessing into it by navigating to it in the tool dialog, or setting it as your default workspace in your geoprocessing environment settings. I have no idea if it would have solved this particular issue, but storing your data layers in a file geodatabase will improve certain functionality, so it's a good practice to get into.
By the way, if your question is in fact answered, do you mind marking an answer as correct? It helps future users with similar problems to find the answer. Thanks!