(1) First issue is actually avoiding founder conflict (Dahrmesh Shah and Brad Feld have blog posts on this issue). Slicing the Pie is brilliant application (as mentioned throughout chain). Best option for starting or super early stage. This mixes sweat equity and cash equity (and provides relative founder share value v. hard cash value). At this early stage, you should both be vested, as these are your agreed contributions. It is also valuable to put written restrictions on what money is used for (again, avoid founder conflict). Cash equity (versus debt) shows "all-in" founder mentality most investors are looking for.
(2) re: Valuation. For going-concern, the only options are debt or equity (with complex mechanisms available to layer on top). For equity, a reasonable valuation/benchmark is that of the last (recent) round--otherwise or just anticipate your next round--again important to make sure both founders are satisfied with valuation. (Debt runs risk of not being paid off by next round of investors (as you said)--but could still be converted at next rounds price.
(3) The next concern (after valuation) is the treatment by subsequent investors. The best way to handle is to create a new line item on cap table that shows your cash shares (versus founder stock). This will be negotiated with investors re: vesting, treatment, etc -- but you open conversation by showing that cash investment is distinct. Different (each?) investors will have different views--and several solutions at this point--again with debt which could be converted in new round. (BTW most likely outcome is you get vested, as they view founder cash as equivalent of sweat equity, depending on timing of investment)
(4) One other date point -- I was counsel to an acquired startup--one co-founder had founder stock (Year 0), subsequently issued options (Year 2-3), and cash purchased stock (Year 3-4). The acquirer had no problem distinguishing between the different forms of ownership.
(5) For a fulsome discussion with empirical data -- see Chapter 6, "Founder's Dilemma", N. Wasserman.
(none of this post is legal advice!)