Like the other two gentlemen have stated above: Don't use MS Paint; It doesn't support transparency.
Try something like Paint.net, since it's good for beginners.
If you're using Paint.net, and you try to save an image, you will usually be faced with a quality prompt such as this:
Never save the image as an 8-bit, because 8-bit has changes in transparency as well as quality.
I suggest you save it as 32-bit, which will automatically fix transparency. As long as you make the decal the right size, it should work from there. Keep in mind: The decal needs to be transparent in
ALL parts that you want to be affected by the player's color.