Jon M - As a Catholic, you can obviously look back at the Catholic church and see how it interprets things.
The Church came first, THEN the canon of the Christian bible, ergo the Church has more authority to interpret, not the other way around.
The church sets the basic boundaries of HOW or WHAT one should do. We are free to move around the circle and use our own mind, but we should always cross-check how our personal interpretation fits within the boundaries the Church has created.
However, to anyone, I think the following criteria helps to establish the correct context.
1) How has this verse been classically interpreted, that is, does my interpretation jive with how others in past centuries have taken it? Often times there is a very obvious way in which these verses have been traditionally interpreted.
2) What is the over all POINT of Focus of that author? Is he known to focus on sexual immorality? faith verses action, action verses faith, love verses fighting? - WHAT? Knowing this, allows you to infer what the author INTENDED.
3) The bible is a compiled text, assembled and put together. One must always remember this. One verse can not contradict another, because WHY then.. do we have the other verses? Therefore, IF you interpretation seems out of synch with the other messages in the bible.. chances are you are taking it too literal OR too liberally.
4) Cross Check - cross check your interpretation with a well known authority. Some authoritative source outside of your own self.. to ensure your own biases aren't reading into it. It could be your Church, it could be your local Pastor, it could be a family member you trust.
5) Literary Devices - Realize that language back then was less literal. Like Shakepeare, it was more colorful and poetic. There was less focus on documentation, more on creating a "Sense" of scripture. For instance, an eye for an eye is not literal. Jesus saying "better to enter heaven with 1 hand then hell with both" is meant to impress upon the listeners a certain POINT. Many of the authors use various literary devices to make their points. The most obvious is hyperbole or over emphasizing the point. Like "No man is righteous, not one seeks the Lord" -- well obviously we know that SOME men are righteous.. Elijiah, Abraham, Moses. to name a few.
6) Language - understand the language, Greek or Hebrew. What was happening at that time in history, what fears the people had. If, like 99.99% of us in the English speaking world, you don't know Koine Greek or Hebrew, then rely on an authority which DOES.. and which clearly takes history into account. The bible was not written specifically for us.. it was written for the people back then. It still applies today and contains a lot of good information.. but we'd be misinterpreting things to NOT take into account the events and people back then.
IF, you can do all these things... then you can be pretty certain you are interpreting things correctly.
IF you think that sounds over whelming.. THEN you realize WHY we need religion in our lives. WHY we need Priests, theologians, Pastors, Vicars, Bishops, etc. to help guide us. WHY it is important which authority you put your trust in.