Gather your materials. I used contrasting fabrics for the bag and handles, but that is optional.
Cut out all your pieces. You will need two rectangles measuring 15" wide by 19.25" tall for the body of the bag, two strips that are 3" wide by 26.25" tall for handles, one piece 11.75" wide by 7.25" tall for the pouch to hold the bag, and one piece 2.5" wide by 3" tall (adjust to fit your clip).
Fold each of the strap pieces in half (wrong sides together if you are using printed fabric) and press. Sew each strip along one short side and one long side.
Turn straps right side out. I used a bamboo skewer to do this step, but you could also use a pencil, etc.
Press both straps, keeping the seam close to one edge of the strap. I sewed down both edges of my straps just because it makes them neater looking. I also clipped off the short edge of each strap that was previously sewn up (I sewed that edge just to make it easier to turn the straps).
Pin the wrong sides of your two large rectangles together, and sew around the edges using .5" seams and leaving one of the short sides unsewn. Clip corners.
Fold the unsewn edge down .5" and press.
Fold this edge down 1.125", press and pin.
Place straps 3.25" from side seams of bag.
Pin in place and sew only to the portion of the top of the bag that is folded down (this keeps these stitches from showing on the outer part of the bag).
Fold the straps up and over the top edge that is folded down.
Turn the bag right side out and sew a hem 1" from the top of the bag. I used a zig zag stitch but that is optional. You are done with the bag, now on to the pouch.
Take the smaller rectangle piece, wrong side up, and press each of the shorter ends down .5". Fold down each end another .5" and sew (I used a zig zag stitch here as well).
With the right side of the fabric facing up, fold one side in towards the middle of the piece. Then fold the other side in so that the two hemmed ends are slightly overlapping.
Sew one edge of pouch, using a .5" seam allowance.
Take the 2.5" by 3" strip and fold it in half (making it 1.5" wide). Press, sew using a .25" seam allowance, turn and sew down the sides just like you did with the straps.
Pin the fabric with the clip on it to the inside of the pouch and sew this end closed. Turn right side out.
Fold up your bag, tuck it into it's pouch, clip on your handbag and enjoy!