If pencil and paper is what you feel most comfortable with - then so be it.

For most standard sites (Header; 1,2 or 3 column main area; footer) I tend to start coding first using different color backgrounds to get the general feel, then work on the graphic elements, menus etc....

Sometimes, especially if there is a very complex element that I have not done before, or that I do not know if it will work, I write that element first, test it and build the rest of the site around it.