Step 3: Trace letters onto wood
Flip your letters onto the wood backwards. This way, when you trace your letters out and make the cuts, you won't have to worry about pencil or pen markings or having any rogue mistakes in your cuts show.
Trace about 1/8th of an inch larger than the stencil you printed. This will give you room to make mistakes and to sand the lettering down.
Another little tip, avoid placing the edges of your letters in any notches in the wood. It may be harder to saw through and the notched bits may create a funky edge in your final piece.