Very few contracts will require you to socialize with colleagues as a part of your work duty. Therefore, you are most likely within your rights to eliminate any contact with coworkers outside of work without giving your employer the right to fire you.
At the same time, this is about as good of an idea as clipping your toenails with a jackhammer. While it will likely get the job done, the solution is worse than the problem you're trying to solve.
The goal of work-life balance is to minimize the negative impact of work on your non-work life (and at the same time preventing your personal life from impacting your work). Creating an iron curtain between home life and work life will have the opposite effect, as any overlap will have to be put on only one side, forcing you to change existing relationships based on a rule designed to not have work affect your relationships.
Case Study 1: The Unemployed Friend
Your buddy John just bought a house in the area before his company went under (the owners decided to invest in magic beans that led to a golden goose, but it didn't pan out). Due to the housing market, he isn't able to easily sell without taking a large personal loss. He's looked far and wide for any job in the area but it's been a year and he's still unemployed.
Your company has a new opening that fits John's skills perfectly. What do you do?
a) Don't tell him -- after all, he's a good friend, and that couldn't work if he got the job
b) Get him the job -- he wasn't a good friend, so no biggie if you can't socialize anymore
Case Study 2: The Local
Every day you go to the same local bar to unwind. Everyone there knows you, and it is your home away from home. It is the sun to your social solar system.
One day your coworker Joan comes in and gets a drink. You are polite (but not friendly!), and think you dodged a bullet.
The next day, Joan is in there again. And the day after. And the weekend. A month later and you realize that the bar just isn't big enough for the two of you not to socialize.
a) Forsake your local bar, after all, your real friends will follow you to the clearly inferior pub down the road
b) Rationally explain to your coworker that, despite you really thinking they are swell from the hours of 9-to-5, that they are not welcome in the bar (but see you on Monday!)
Case Study 3: The Dinner Party
Your spouse has slightly different social circles than you. While you are down at the local bar, your spouse is doing charity work or single-handedly curing cancer.
One day your spouse tells you that another couple from the soup kitchen will be having dinner with you tonight. When you open the door to greet them, you realize it is Don and Jan from Accounting!
a) Refuse to ever let your spouse have house guests without prior authorization
b) Maintain your professional relationship with Don and Jan by being anti-social
As time passes, your number of existing colleagues and your social circle will likely grow, and make these sorts of overlaps more common. Having a rule you refuse to compromise will make situations like the one above incredibly awkward, and affect your non-work relationships (with your friends, your acquaintances, and your family in cases 1-3 respectively).
If you act like a reasonable human being and compromise in those corner cases, then there's no harm in dropping the absolute rule from the beginning (and judging what an appropriate relationship would be on a case-by-case basis), since creating the iron curtain of work-life balance will strain professional relationships.
Business is People
Not socializing at all outside of work (even lunches) is going to rub many people the wrong way. Regardless of your justification, people are social creatures by nature, and refusing to indulge that nature due to having a working relationship will not make sense to many people.
The perception will depend on the person, but some things people may assume about you are:
- You are socially inept
- You do not like your coworkers
- You are not a "team player"
- You are planning to leave the company soon
- You have a "questionable" personal life
Depending on who has what perception, this could impact your career/quality of life by:
- Lack of choice in what projects get assigned
- Getting passed over for promotions
- Getting worse performance evaluations
- Getting lower performance bonuses/raises
- Being denied non-essential requests (attending conferences, etc.)
- Being first on the chopping blocks for any restructuring
- Being denied recommendation letters
These things will also affect your social life. By forgoing healthy relationships with coworkers (with this work-life iron curtain) you run a higher risk of being transferred to a distant office, or reducing your quality of life (vacation time, income, etc.) which will backfire and have a larger impact on your non-work life.
At the end of the day, perhaps you don't mind a dead-end career and boring work, but any way I look at it, you are giving up far more by creating such a draconian rule than you would by using a bit of common sense and making decisions on a case-by-case basis.