Creating Outline Help

Hey guys,

So, I am trying to create an outline, that I can then use to cut out the image. I know how to create outlines, but the issue I am having is that if the image isn't already a perfect outline, selecting hairline or boundary goes into the design, rather then creating a border/outline.

I have been practicing on a random image just to learn, but can't seem to figure out how to get a hairline border so I could cut it out if I wanted to.

Am I missing something obvious?

The other concern is that I don't have a way to freehand it either as I use only a mouse, and I am not skilled enough to make a nice outline that way.

I have attached the image I am practicing with.

Thank you