Practice practice practice.

Use your dash and the horizon to set your "sight picture." Glance at your airspeed, bank angle and alt and relate that to where your dash is on the horizon.

Nobody gets it the first time but after enough practice, it will become as natural as any other flight skill you've learned.

I think it is important to remind students that every single maneuver in the private PTS is best accomplished by using outside references. This maneuver requires some basic building blocks to be place before it becomes natural.

1. Seat Position - I can't stress this enough. If you fly with a different seat position you will never be able to learn how to fly outside the airplane. This is due to your sight cues being different for each and every flight. In the Warriors and Cessna when I get in, I place one finger on the dash and I adjust the seat so the finger is in line with the top of the cowling. This ensures I have the same seat position every time.
2. Level Flight - Can you maintain altitude by only looking outside the airplane by placing the horizon a certain distance from the cowling. Refer to step one if this is an issue. Level flight for me is placing the cowling 3-4 fingers below the horizon.
3. Proper trimming of the airplane. Do you look outside when you trim and try to maintain a level attitude till the control pressure is relieved. If not, it'll be difficult to maintain level flight.
4. Climbs and Descents - Place the cowling of the airplane in the climb attitude. For me, in a C-172 I place the cowling on the horizon and let the airspeed decrease to Vy or so. The airspeed should stabilize around Vy. The descent is the same way I place the cowling around 5-6 fingers below the horizon.
5. Straight Flight - Can you maintain a heading within 5 degrees using only outside references. Place the nose of the aircraft on the point you want to go to. If the point starts moving, correct it. This may be a little difficult because the longitudinal line of the airplane and the nose is not in line with where you are sitting. It may be easier to place a point on the cowling that is in-line with you on an object in the distance.

When a student can do these five things, the challenge gets harder and we introduce them to turns till we get to steep turns. Only one thing on turns that should be mentioned. The rudder and aileron should be used together. When you apply aileron apply rudder and when you neutralize aileron, neutralize rudder.

The art of the steep turn is to pick a point in the distance as the starting point and apply aileron and rudder together and quickly (don't diddle daddle or your altitude will waver) bring the airplane to the 45 degree outside horizon and apply back pressure to bring the cowling to the horizon. Add power to keep airspeed. (In small training aircraft it's full power) Glance at the attitude indicator to confirm bank angle, glance at the altimeter to confirm constant altitude.

Look outside!

If either is off, correct using outside references and glance again at those two spots and nothing else. Make a constant effort to keep the cowling on the horizon and the horizon slicing through at 45 degrees. Every 90 degrees or so, glance at those instruments again to confirm what you already know on the outside of the airplane. When you see the starting point in the distance, put it on the nose (or slightly before) and apply aileron and rudder quickly to roll wings level or in the opposite direction.

If this is done properly, you will automatically correct for the overbanking tendency of the aircraft.

An AOPA columnist, Ralph Butcher, once wrote an article on the "integrated method of flight instruction". This is basically where we tell the students to use the instruments just as much as outside references. He and I agree that this has gone too far. He mentioned steep turns in the article and he covers all the instruments for his student pilots till the last three or four flights. He teaches them to use outside cues first and then confirm inside what is happening outside. He mentions that once he finally gives the instruments back, the student pilots are well within the minimum standards of the Private PTS.

Here are some worthwhile articles on looking outside the aircraft. You'll need to login to AOPA to view the articles :(

Instrumentation

Integrated Training

360 degree turns: Steep Turns

Try looking outside of the cockpit when you do your turns. Have your instructor perform the turns to the left and right and watch how the horizon cuts across the windshield. That's what your instructor means by "sight picture." Next when its your turn, line up the aicraft with an object in the distance, a water tower is a great example. Now do your turn and try to match the sight-picture of the horizon when your instructor performed the manuever.

Keep in mind to "peek inside" while you're doing the turn to make sure you're on your target altitude, now when you start to see the object you used as your point of reference, use that as your reminder to watch your heading and start to plan your rollout 15 degrees from where you started.

Good luck and keep trying! You'll be surprised how easily it will seem when things finally click!

I found that putting two shots of nose-up trim prior to rolling into my steep turns helped. If not, I was using a lot of back pressure on the yoke resulting in less precise control.

This was in a C-172.

2 and 2 method.

Get set up for the maneuver, straight and level at the appropriate airspeed...90 knots or so in a 172.

As you roll in, add 200 RPM. Once established, give the plane two shots of nose up trim. The plane should become stable with next to no control inputs in the turn.

Lead the roll out by about 25 degrees. As you roll out, bring the power back 200 RPM. Remember also to push the nose over to maintain altitude (it pitches up due to the trim you gave it.) Two clicks of nose down trim, and viola...on airspeed, on altitude.

This may sound silly, but if you have a real joke (like Saitek or similar) and rudders, practicing with X-Plane or FlightSimulator also helps to make sure you got the basics covered. (And it’s cheaper). But the best advice has already been given. :) Practice.