Your instance's total memory is very low, from the docs ( I feel it should always be atleast 2 GB)
For a small number of projects (less or equal to 100) with 1,000 to 5,000 issues in total and about 100-200 users, a recent server (multicore CPU) with 2GB of available RAM and a reasonably fast hard drive (7200 rpm or faster) should cater for your needs.
The reason that Atlassian recommends atleast 2 GB is because it's not only about number of projects and issues but JIRA in-itself under-the-hood is a complex Java application which in the background handles Lucene indexing, database caching, LDAP caching etc Thus all these operations need memory. Your instance has been allocated 697 MB which is very low for a complex production Java application.
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