Here's what I did.
Step 1: Measure 2 inches from the edge of the picture in the middle (not from the actual, white, outer edge).
Step 2: From the picture cut-out, measure 1 inch from the (outer) edge on the cardboard. The cardboard should be an inch bigger on all sides than the picture. Adhere the picture to the middle of the cardboard.
Step 3: Cut the extra pieces of cardboard in strips with each edge cut diagonally (as below). These 4 strips of cardboard will form the square "frame" around the picture.
Step 4: Cut the extra pieces of white paper into strips and wrap them over the cardboard strips. I used transparent wrapping tape on the underside.
Step 5: Adhere the strips of cardboard (wrapped in white) to the main cardboard backing, forming a frame. I used a glue gun because it adheres fast.
Step 6: I used photo corners to adhere the page (instead of sticking it directly on the paper). This way, the frame can be re-used for another layout.
Another good thing about this is, you can opt to decorate the frame too (I hope to try that soon).