There are two opposing schools of thought regarding this matter: Taylor Swift and J.D. Salinger.
Taylor Swift kisses and tells to the point where it can be mildly irritating. I am not interested in her love life and she seems quite whiny. As an Irish dna holder, this can grate my last nerve. She puts everything into her songs. Every big moment can be a song to her. Kisses are all documented and pillow talk is shared. I am always amazed that she and Honey Boo Boo’s mom can still find dates. I don’t find living so publically appealing, then again I don’t even like people knowing my name. While I did use a man I met this summer as a muse for my second book, he is not a man I spoke with for longer than a few hours. If he had asked me not to say anything about him, I wouldn’t have. We writers look for inspiration in everyone, including ourselves. Most debut novelist base their protagonist on themselves whether or not they realize it. It is a sign of creative immaturity to use the person wholeheartedly without changing many details. People should inspire characters, not be carbon copies. Give these people challenges, different characteristics, or new platforms.
Some of my acquaintances ask me if I put them in my personal works or if I was inspired by something that happened to them. Most of the time the answer is no. Their lives should be inspiring for them, not me. People want to be in your works; it is simply human nature. Rules change as the inspiration does. If the story involves a court case, then make sure you change identifiers to the case such as names, dates and locations. In my ghostwriting I am working on a fictionalized account of a court case. It is key to tread lightly here. Don’t make anything obvious. There are books out there on famous court cases because it can be argued that the information is common knowledge. A private citizen is most likely to guard their privacy than an attention seeking pseudo celebrity.
My rule of thumb is anything a person wants shouted from the rooftop is acceptable, what they do not is off limits. Writers may be lonely creatures because we tend to use people for our creative needs initially. Once one person walks away from the creative because they put them out there, then they learn to be discreet.
The other school of thought is nothing should be used from real life and creativity/imagination should suffice. This is fun, but the danger is that the characters will not ring true. People are not all good nor all bad. But in order for readers to relate they must have something in common. Reality can be the best inspiration.
Be careful with using your real life connections. Some will be into it, others don’t want the emotional equivalent of kissing and telling. You must decide how much you are willing to lose someone’s trust for something that may never be published.