Materials: Mylar, X-Acto knife, tape, mud, sponge.
1.) Design your stencil. Draw your stencil the size you want it, or design it on a computer and print it. Make sure you do not have islands (parts of an image that will fall out if you cut around them, like the middle of an O.) If you are using text, use a stencil font. If are using a computer print your design the size you want the stencil to be. If it is larger then 8X10 cut it apart in photo shop and print it in pieces, or enlarge it at a local copy store.
2.) Cut it. Tape your design behind or in front of the transparent Mylar. Mylar is the same stuff used as transparencies for projectors, you can find a roll of it at art stores. Use the X-Acto knife to cut your design out of the Mylar.
3.) Get Mud. Soil + Water = Mud. For a quick and simple stencil any almost any soil will do. Avoid sticks, sand and rocks. It takes experimentation and time to get the right consistency and color.
4.) Post it. Tape the stencil to whatever you want it on, it works on sidewalks or walls. If parts of the Mylar roll up put some tape under it. Then use the sponge to dab the mud on your stencil. Do not press too hard because if you squeeze muddy water out of the sponge it may sneak under the stencil.
5.) Enjoy. Remove the tape on the outside of the stencil. Carefully remove the Mylar, and enjoy your non-toxic mud stencil.