As was said earlier, there are different genres, and all genre's should be interpreted, as an earlier post says, not according to our own private interpretations. but the way God intended them to be interpreted.
As was also shown, God spoke in parables. These are not literal stories, but a message is to be taken from the symbolic message Christ was trying to show.
However this does not mean we should interpret all of scripture this way.
Prophesy. All prophetic scripture is used to show God is God and he gave the message, in other words, God is the only one who can know what will happen 1000 years from now. No other God, or man can. So if God says "such and such" will happen in 7 years, and the thing does not happen in 7 literal years. God lied and is considered a fraud. This is what separates him from False God.
So prophesy should be taken literally not allegorically.
As for anything else. I rule of thumb I use is scripture can not contradict. So when I see Paul say "Abraham was was found by faith and not works (paraphrase) and James say the total opposite. I have two choices.
1. One of them was wrong (which would invalidate scripture)
2. I must interpret in a way in which both James and Paul, although appear to be saying something which is apposed to each other, But where they are in harmony with each other.
In other words, I make my belief fit context of scripture, and not make scripture fit my belief. If my belief in a passage causes a contradiction. I must be in error on my interpretation of one of the two contradicting passages.
Finally. Context. Scripture was not written in verse form. It was written as letters, or literal books. Thus we should not try to take a "verse" by itself to back our own personal belief, but should look at context of the whole passage in question.
We can make any sentence of any book in scripture say anything we want. It is context which shows if our belief is our own "private" interpretation. Or lines up with Gods word.