A while back, I made a small sign holder to place on my buffet and change out seasonally, you can see it here. I hadn't made anything patriotic for it yet so I decided to make a distressed flag.
I started out with a small wooden plaque that I buy from walmart for only.97. I used a ruler to measure for the lines and drew them on with a pencil. As you can see in the picture, I made the blue box, 2.5"x 3" and the lines .5".
The next step was to drill the holes for the wire so that it will hang. I have used these plaques for a lot of different things and I have found that if you try to make a very big hole, the plaque will split so I used a 1.98mm bit. Next you want to sand any rough areas. Its important to do all of this before you paint, just in case it does splinter.
Here it is on my sign stand (sorry its a little blurry):