- Open your original layered PSD file.
- Go to Layer > Flatten Image. If prompted to discard hidden layers, click OK
- In PS go to Image > Image Size (in PSE, go to Image > Resize > Image Size) and change your resolution to 72 dpi. Change your pixel dimensions to 500x500. (Make sure "Resample Image" is on.) Click OK.
- Go to Save > Save for Web. You will get a new dialog box where you can adjust the Quality value until you see an acceptable file size in the bottom left corner.
- Adjust the Quality value and click OK. You will be prompted to name your compressed file and save it to a location on your hard drive.