I picked up an important business (and life) lesson from my father when I was no more than six or seven years old. I’m not sure if he said it to my brothers and me or if I simply overheard it. What he said was: “Don’t mix business with family.”

He might have added, “Or with friendship.”

I believe at the time he had just decided not to sell one of our cars to my uncle. Why? Because you never can tell what will happen to a used car, and he didn’t want to risk having the car drop a transmission – and having his brother think he’d been sold a lemon. So he traded the car in at a dealership.

Risking bitterness

Of course, some people do fine in financial dealings with people close to them. Many successful businesses are owned and run by families. But it’s necessary to enter such transactions or businesses with care, and with an understanding of your own and the other parties’ temperaments.

How many families have been ripped apart by disagreements over a business? And how many good friendships have been scarred or ruined because of a financial arrangement, no matter how seemingly small, that went sour?

For my part, I like to think I wouldn’t turn on a friend just because some transaction didn’t work out quite as planned. I’ve sold a few things to family members and bought a few services from friends. For example, I paid my brother, then a carpenter, to help me fix a section of roof on my first house and to install a couple of windows.

But I’m cautious and highly selective about these things because personal relationships are valuable and I prefer to keep them pure. A co-worker (also a friend) once offered me a good deal on a car. I had it checked out by a mechanic and got an equivocal report. So I gave that to my friend and told him, “Let’s not get involved in this. There are lots of cars out there.” He understood completely.

Drawing the line

And there’s an important point. Why risk a friendship on a minor item of business when there are so many alternatives? When I started a business some years ago, I knew I would need an accountant, and my younger sister happens to be a CPA.

I thought about engaging her services, but then asked myself: What if somewhere along the line she made a mistake? It wasn’t that I doubted her ability. It was simply that in such an event, I would want only to be upset with my accountant – not angry at my sister. So I paid her to spend an afternoon teaching me to run my accounting software. But then I hired a fellow in town, based on a referral, to be my adviser and do my taxes.

I also chose not to hire a friend, who was a newly minted real estate agent, to sell my house. As it turned out, the sale got complicated, the agent was ill-prepared, and although the deal eventually closed, it was costly and stressful. If my friend had been my agent, would we still be friends today?

For anything you care to name – any purchase, any service – there are countless choices on the open market. You have to compare the potential sweetness of a special deal from a relative or friend against the potential bitterness of that deal going bad. For me, no matter how small that risk may be, it usually isn’t worth taking.

Applying the lesson

I am about to apply my father’s lesson again. I plan to move my retirement account to a new adviser, and a long-time friend is about to enter the financial service industry as a second career after an early retirement.

We’ve spoken about his taking over my account. But lately the markets have headed down and so has the value of my portfolio. I don’t blame my current adviser for that, and I wouldn’t blame my friend for it if he were handling the business.

But then I ask myself: Would I feel differently about my buddy right now if he were my financial adviser? And what would happen if he did make a mistake? It could tarnish the friendship, and the friendship is worth too much to take that chance.

So when the time comes that we discuss this matter again, I’m going to tell him no. And then, with no qualms whatsoever, I’ll tell him why.