You're not doing anything wrong per-se, just not the best that you could.
When starting a new document forget all about linear measurements. (Inches, mm, yards, etc)
Digital images are defined by PIXELS and pixels ONLY.
There is no such thing as 3" long or 2.5" wide (high).....even though you may think there is....and here is why.
ANY image can be 'dimensioned' to ANY size, (within reason), and to any unit value....inches, mm, yards, feet, parsecs, football fields....whatever.
This is done AFTER you finish the project....either when you want to save it as a digital image for use in the digital world, or print it out for use in the real world.
The ideal workflow therefore is to create a document as big as you or your system can handle......IN PIXELS. The only thing you need to get right is the RATIO of its width to its height....or in other words the same proportions as the final image you need.....in this case 3:2.5.
With that in mind a document 3000px wide by 2500px high would be more than enough to work in, but the bigger the better...system allowing. Even 1500x1250 would be relatively 'big' to work on.
Once you're done you'd then save that project as a PSD file to keep your layers and fx etc etc.
You can then OUTPUT that image to ANY size you want:
Digitally....use the 'Save For Web' option and enter the OUTPUT dimensions in the boxes provided.
For PRINT use IMAGE > IMAGE SIZE and with RESAMPLE OFF set the width to 3".
In this example that would give you a resolution of 1000ppi, well above any requirement of most commercial printers.
You could, if you really wanted to, stick with the more normal 300ppi, resample the image which would make it around 900x750px but its best to do that on a copy of the PSD file just to make sure you keep the original safe.....if you feel brave then use the original but DO NOT save it again.
That's about it really. Have the document as big as you can, (IN PIXELS), in the right proportions and save out to the size you want at the end.
Regards.
MrToM.