You don't cut anything down or waste anything. You are simply making quick HST's from the squares, and if you do the math, the 4 1/2 inch is the sum of the two final HST's. I'm not sure why they have you draw the 1 7/8 inch square. It is a totally unnecessary step. Just draw the diagonal line, sew 1/4 inch on either side then cut in half on the drawn line.