The cost of living in Spain again, depends on where abouts in Spain you are, but overall it is much cheaper than living in other countries in Europe like the UK, for example. Naturally, the prices of goods and services are going to be higher in the centre of the tourist areas. Smaller rural towns, you will find the products cheaper and most likely fresher, especially if they are home grown, which is often the case in Spain because of the good weather conditions.
In comparison to other cities in Europe, stats show that Barcelona is just under 20% cheaper than London, and that's one of the main cities of Spain. The general standard of living in Spain is good and the cost of living is cheaper too, although accommodation bills like air conditioning may cause the property prices to be higher, depending on how big the building is.
In the major cities like Madrid and Barcelona, you will need a bare minimum of €800 - €1,000 to live (shared accommodations), €1,300 provides more comfort including drinks and coffees on the weekend. Anything more than that is clear sailing (applicable for a single, working person living in a shared accommodation, and after taxes). It is common in Spain for people to stay living at home with parents for a longer time frame than most Europeans (late 20's - early 30's), so as to save as much money as they can. This way when they do move out, they have far more disposable income to spend on other luxuries.
For those planning to work in Spain, wages in comparison to the cost of living is generally poor. Product costs are being increased by roughly 10% a year, which is causing inflation. The arrival of foreigners coming to live in Spain has been one of the reasons why this is occurring.
In the bigger cities, you may very well find yourself spending most on the price of housing. However, with Spain in such poor financial situation these days, the property prices are expected to drop considerably this year (2012). An estimate of a 24% drop in house prices has been released with banks doing everything they can to lessen their non-risk liquidity percentages.
When budgeting for electricity in Spain, roughly €35 - €40 a month should be estimated. Electricity is not cheap in Spain. In the summer time when the temperature rises, air conditioning becomes an essential part of the home and in the winter, temperatures drop down quite low so the heating bills will rise.
Food and Drink:
In relation to food, for two people bills are generally €300 a month. An average restaurant bill is €8-15 (much cheaper at lunch), with a glass of beer or wine one to two euros. In the smaller towns, you can experience dining out at a good quality restaurant for €15-20 each. This can also be found in bigger cities, although a bit more effort might be needed to find them.
A refreshing cup of coffee or tea can be ordered in many cafes in Spain for one euro or less, and the cost of fruit and vegetables can be a bargain. Spain has many markets surrounding the citiy streets, where an array of fresh produce can be bought ranging from seafood and meats to cheese and fresh herbs.