Finally got it to everyone. This is the process that I take when I do the "cutout" effect on the computer with my Miyazaki Tribute art. Here is a step by step.
1. Sketch of the character, trying to keep cutout in mind.
1.5. Scan to computer
2. Put every section on a layer. Make it the right colour.
3. Make the different layers more noticeable with slight colour change.
4. Do a little shading.
5. Add drop shadow to all layers
6. Adjust drop shadow to look better according to layer
7. Add paper texture to all layers
8. Final touches
Thanks for viewing and I hope this helps. Send me examples how you do this technique. I would love to see alternatives.