Start with a basic t-shirt.
Simply cut off the arms at the seams.
You can either leave the seams on or cut them off - it doesn't matter.
Next, cut the neckline off.
See above pic.
Turn your t-shirt inside out and serge or sew the bottom (the part that is around your waist) together.
To square the bottom of the bag, bring the seams together and measure 1 1/2 in from the corner. Now draw a line across and serge or sew on that line to cut the corner off like this.
Now your ready to go shopping!