We've written about yarn-wrapped letters before and it's not an expensive undertaking, but Jill's version is dirt cheap.
She made her own letters from super inexpensive foam board, used yarn from her stash and a little bit of glue for an estimated $2 project cost. I love the hominess that the yarn adds to the text and you could customize it in any color or color combination you wanted. She has a few tips to share about the project on her blog Handmade by Jill and you can also see another letter she made with thinner yarn ("and more patience") with a slightly different look.
(Image: Handmade by Jill)