Below are some ideas to help you maintain your balance on this tightrope:
1. When developing a character, make it a composite of several people. Aunt Mary won't snub you at the next reunion--unless, of course, you use a mannerism that is peculiar to her and easily recognizable.
2. There are situations you won't want to write about, but can take the emotions associated with them to bring life to your characters or non-fiction pieces. For example: If you've lost a loved one, you'll be able to write about a character, who has endured multiple losses. You can overlay your emotions onto her situation.
3. Never write about real people without getting their permission in writing or changing the names of those involved. You might also want to disguise or change the setting. I'm sure you've seen stories where there's an asterisk after the person's name and a footnote saying the name has been changed to protect them.
If the story is about you, but you wish to remain anonymous, use a pen name. Using a real person's story without their written permission could open you to a lawsuit. (Please note: I am not an attorney and cannot give legal advice. This is just a warning to be safe rather than sorry.)
What are some of the ways you fictionalize your real-life scenes? Have you ever gotten into trouble writing about someone you know?