We don't use paper towels... GASP! I know. My mother-in-law almost choked on her water when she asked where the paper towels were to clean up a mess off the floor in the kitchen and my answer was "We don't use paper towels, we have regular towels in that cabinet".
My husband and I have been using regular towels for instead of paper towels for about a year. Not only is it WAY cheaper, but it is such a waste to use something for 0.3 seconds and then throw it away. I know my parents go through like a roll a day... that is so many trees! Sure you can buy the recycled Seventh Generation stuff, but to me it is so not worth it when you can reuse something over and over.
So, here is our system. We have towels (microfiber towels are great... they are great for dusting and scrubbing) in a basket in a cabinet next to the sink.
Then under the sink, I have a small "laundry" basket, and I just throw them in there when they are dirty. Simple.
I wash the towels every couple of days, or when the basket is full. This has saved us quite a bit of money and quite a few trees!
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