Yes you can live on €1,000 per month in Spain. A lot of people here earn less than that working full-time.
Provided you own a property outright with low outgoings, you certainly can. If you're buying a property with a mortgage or paying rent or, that's more difficult, even though rents are very low at present. In Málaga and other parts of the Costa del Sol you should be able to rent a 2-bedroom apartment for €400 a month, plus electricity, water and gas.
My total bills for electricity, gas, water, council tax, community charges, insurance, phone, Internet, and cable TV (Spanish, of course) don't come to €250 a month. I keep a check of them using a spreadsheet. I'm vegetarian, eating a lot of fresh fruit and vegetables and drinking a lot of fruit juice, and I spend about €160 a month on food, which includes beer and wine (good German beer costs 29 cents a can at the Lidl supermarket and a decent bottle of Ribera del Duero red wine about €2.50).
I go out a lot, because I was divorced last year (after 15 years of marriage to a Spanish woman), but a bottle of beer in my local bar costs €1.50, including a tapa, and there are a lot of cheaper places. For example, in the legionnaires' bar nearby a bottle of beer or a glass of wine is €1, and the same in the Spanish singles clubs for golden oldies in the centre of Málaga where I'm a member. In bars with rock music or jazz or flamenco in the city centre a drink costs €3 or €4 after midnight, usually with no admission charge.
You can easily eat out for €10 or €12, either choosing the set menu, or in an Indian restaurant or an eat-as-much-as-you want buffet.
How much you spend depends on your lifestyle.
I live alone in a 100m² (1,000 ft²) apartment with three bedrooms and two bathrooms very close to the city centre (council tax €137 a year, although in coastal resorts or for a house you'd pay more). Because of where I live I can walk anywhere in the centre, so I don't need a car. I'm ten minutes from the bus station and 15 minutes from the main train station. From there it's ten minutes on the train to the airpot. Right next to where I live there's a supermarket, a greengrocer's, a baker's, a bar, a café and a hamburger joint, plus two social clubs and a newspaper kiosk. The clinic is a two-minute walk away.
I've bought a rechargeable card for the Málaga buses, which costs less than €8 for ten journeys - any distance within the city - and that includes one transfer within an hour. Buses along the coast are very cheap - €1.50 is the most I usually pay. Because I'm over 65 I quality for a tarjeta dorada, which costs just over €5 a year and gives me a 40% discount on most train tickets (although not all long-distance trains).
Last month I was in England for my son's wedding, and I couldn't afford to live there, I'd just be existing. £3.80 for a pint of beer in an ordinary pub! In Spain I can live modestly but comfortably, with money over for an occasional trip to England and travelling elsewhere.
My total income is round about €1,200 a month, although exactly how much depends on the value of the pound, because I receive my pensions in pounds. The only grey clouds on the horizon are the possibility of the value of the pound dropping drastically or Spain leaving the eurozone.
If anyone is thinking of retiring to Spain my advice would be to choose a place with good public transport and check on all the bills before buying a property. Allow about 10% of the price of the property for taxes and other one-off expenses related to the purchase. If you speak Spanish it's not necessary to use a lawyer. I didn't. You do need to use a notary, who doesn't work for either the buyer or the seller. The notary's job is to witness the transaction and prepare the title deeds. Read the deeds, or get a Spanish speaker to read them, because I found a couple of mistakes. One of them was that they'd used a middle name as my first surname. You should check yourself at the property register that the person selling is the registered owner and that there are no debts or other problems. This is easy and cheap. Don't rely on an estate agent to do this. Agents are working for the seller, not the buyer.
If you're retired and receiving a UK pension, health care is free once you've registered with the Spanish Social Security using form S-1, which you obtain from the Pension Service in the UK or in your home country provided you're an EU citizen. Before going to the Social Security office you need to register at the police station and the town hall.
I first came to Spain 21 years ago and bought a property in 1998. Although I've lived elsewhere during those 21 years - in New York, Saudi Arabia and Miami - I haven't lived in England since 1991, and I've intention of ever returning there to live, despite my divorce.
Welcome to Spain, the best place in the world to live that I've found.
This message was last edited by mdavidfrost on 06/10/2012.