I love wallet sized pictures. I think they're the sweetest size to keep, to tuck in a note, and to give away. Although I can print 4x6 prints for around 10 cents a picture- even less on sale- wallets can be as much as 30 to 50 cents a piece. Yikes! Then I discovered how to take one 4x6 picture...

1. Open a new, blank file (File>new>blank file) and set width to 4 inches & height to 6 inches, resolution 300px/in, background white or any color of your choice
2. Access the rectangular marquee tool, and in the the tool's option bar select "Fixed size." Set the width to 3.25 inches and the height to 2.25 inches. Turn on the grid, View>grid, and snap to grid, View>snap to grid.
3. Duplicate the background layer, Layer>Duplicate layer, and create the first box by clicking with the rectangular marquee tool. Position the box, then fill it with 50% gray (Edit>fill selection, and under contents select 50% gray.) Select>deselect gets rid of the marching ants.
4. Repeat for the next box. You should now have a document containing two rectangular boxes filled with 50% gray.
5. Select the first box that you wish to fill (with the picture) with the magic wand tool. On the tool's option bar be sure that contiguous is checked. You should see "marching ants" around the selection, indicating that it is active.
6. Open picture 1, go to Select>all, Edit>copy, then go to your layout as completed in step #5, and Edit>paste into selection
7. Your image will be larger that the rectangular box, but you can drag it around to position it as you like. Holding shift as you resize the image with the corner handles will keep it from distorting.
8. Repeat for picture 2 with the 2nd box. Or, if you'd like to use the same picture for both boxes: select box 1 with the rectangular marquee tool (set back to "normal"), Edit>copy, select box #2 with the magic wand tool (still "contiguous"), then Edit>paste into selection.  

Billy is now 6 months, and wearing an outfit from when Papa was a baby. Handsome!

The directions are for two "landscape" wallets. If you would prefer "portrait" wallets instead:

1. Open a new, blank file (File>new>blank file) and set width to 6 inches & height to 4 inches, resolution 300px/in, background white or any color of your choice
2. Access the rectangular marquee tool, and in the the tool's option bar select "Fixed size." Set the width to 2.25 inches and the height to 3.25 inches. Turn on the grid, View>grid, and snap to grid, View>snap to grid.
3. (Continue as above)

*I use Photoshop Elements right now for my photo editing, but the directions should be adaptable for other Photoshop programs as well. Good luck!