1
First, let's create a new file (
File > New).
- Resolution - 72
- Color Mode - RGB Color
- Background Contents - up to you
Click OK.
2
Click the
Create a New Layer button

in the layers palette. In the toolbox, click the
Rectangular Marquee tool 
and make a rectangular selection. Make it fairly big. This is going to be the size of your paper.
3 Set your foreground color to
#C69C5F and your background color to
#FCF4D7. Go to
Filter > Render > Clouds.
4 Go to
Filter > Texture > Grain and use these settings:
5 Go to
Filter > Texture > Texturizer and use these settings:
- Canvas
- Scaling = 63
- Relief = 4
- Light direction = Top
6 Click on the little
f at the bottom of the layers palette (see image to the right). Go to
Drop Shadow and use the following settings:
7 Next, click on
Inner Shadow (click the words, not just the check box). Use these settings. The color is #523800 and the contour is Linear.
8 Click on
Pattern Overlay and use these settings. The pattern is Clouds.
9 Now select the
Lasso tool 
in the toolbox and draw a jagged line for the edges, as shown in the image to the right. Once you have selected the entire paper, go to
Select > Inverse and press
Delete on your keyboard. You should have something similar to the image below.

How about "burning" some holes into the paper? With the Lasso tool, "draw" a hole. Once you have your selection, do not invert it, just press
Delete and go to
Select > Deselect to deselect it. Repeat this as many times as you want.
10 Let's burn the edges of the paper now. Select the
Burn tool 
in the toolbox. In the Brushes palette (go to
Window > Brushes if you can't see it) choose a soft, round brush tip and start burning the paper edges. Burn also the area around the holes.
11 Optional: If you want to lighten other areas of the paper (like the center), select the
Dodge tool 
in the toolbox and again use a soft brush tip to get the job done.
12 Now let's add some text. Select the
Horizontal Type tool 
. Click and drag in the image to define a bounding box for the text. Pick a font, size and color (preferably black) and type in your text. When you're happy with it, go to
Layer > Rasterize > Type.
13 If you added holes to your paper, chances are good that the text is covering one or more of them. To fix this, press
Control and click on the
paper layer in the Layers palette. You should get the so-called "marching ants" around your paper. Click on the
text layer in the Layers palette and go to
Select > Inverse, then press
Delete on your keyboard. You should now be able to see through the holes.
14 We're almost done! Turn down the opacity of the text layer to 60%-65%, and let's distort the text a little to make it look more realistic. Go to
Filter > Distort > Wave and use these settings.
Other settingsType = Syne
Underlined Areas = Repeat edge pixels
Apply the filter to both the text and the paper layers.
That's it. If you find that you burned the paper too much, click on the paper layer in the Layers palette and go to Image > Adjustments > Hue/Saturation. Decrease the saturation a bit.
Here's your old, burnt piece of paper.