Make this little elf from old shirts and garage sale materials.

Step 1: Materials

ELF
Muslin-like material (Body)
Striped Material (Legs)
Embroidery floss (face)
Yarn (hair)
Old pillow (for stuffing)

Garments
Felt (shoes)
Brightly colored shirt (dress& Hat)
Ribbon for trim
Beads for trim

Other
Hot glue gun
Needle & thread

(All of the items were either used, or purchased at garage sales. Always try to use reclaimed materials before buying anything new.)

Step 2: Elf Body - Pattern & Cutting

Create a pattern by folding a paper in half, then drawing on one side. Go around the line with dots for the seam allowance. I've shown this on a 1" cutting grid to get an idea of the size.
Cut out the pattern while folded. This will make both sides even.

Pin the body to the muslin material and cut out.

Repeat for the legs on the striped material.

Step 3: Elf Body

Sew around the edge, leaving the top of the legs, and the bottom of the body open.
Make notches along the curved edges, and turn right-side out.
Iron legs & body flat.
Sew yarn along the edge of the top of the head.
Stuff legs and body. Trim top of legs if they are too long.
Fold bottom of body under, and pin legs under the fold.
Sew straight across.
Embroider face on the elf, or use fabric paint.

Step 4: Elf Garments

Dress
Normally, you would follow proper pattern procedures, but since this is a decoration/ornament, just lay the doll on the fabric and trace around.
Fold the shirt in half, and cut to make sure both sides are even.
For the end of the sleeves, turn back 1/8" and sew a tiny hem. Do this to both sides of both sleeves.
Turn right-sides together, (Make sure hems are facing out) and sew along the edges.
Turn right-side out, and place dress on the doll.

Hat
Draw a curled shape onto the fabric, with a seam allowance, and cut out.
Sew along the edge, and turn right-side out. Stuff lightly, and tack onto head with a needle & thread.

Step 5: Shoes

Cut out shape for shoes and fit over foot. These will look extra big until you turn them right-side out.

Step 6: Adding Trim, Beads, and Embellishments

The pictures show me doing the dress first, but you get the idea.
Hot glue ribbon around the sleeves, bottom of the dress & hat, and around the neck.
Sew beads on shoes. Sew one bead at end of curl on the tip of the hat.
Add buttons to the front of the dress.

Hot glue a ribbon on the back of the hat for hanging.