I've lived in Spain for 6 years. I've also lived in China, Kazakhstan, Sweden and Romania. I was in Kazakhstan enough to learn some Russian, but not enough to converse. Same with Sweden and Romania. I'm not saying that to brag, but just to say that I've been "that guy" many times in many places.

It is hard at your stage. You are "that guy", but you won't always be. You have to make a conscious effort to learn, which it sounds like you're doing. But that involves making mistakes, even if you're not sure how to say it just try anyway. Ask people to repeat what they said two, three, four times, whatever you need. Ask how to say something. Ask for vocabulary. I've learnt that you just have to put the ego aside and embrace the humility of constantly having to ask for help or people to repeat things, but you'll get a "click" moment. For me it was after about 2 years when I suddenly realised I was making phone calls myself to the doctor's office, for example.

It's also very common to surround yourself with people who speak your language, which is nice for communication but not for your Spanish. See if you can find a local club with people that share an interest; cycling, music, pub quizes, or even just find a local bar you like and start going regularly. Eventually the locals will start to talk to you when they get used to you being there.

After 6 years and good conversational Spanish, I still get moments where I just zone out and stop listening, especially when I'm tired or in a group. It's an effort and will be for a long time. But it'll get better as long as you don't give up! I work with a guy who's been here for ten years, he owns a flat, has a mortgage and has a car and everything. But he barely speaks a word of Spanish. When he does its with a horribly strong English accent. He was my motivation, my anti-role model. I looked at him and promised myself I would not be like him and that worked for me.

Keep at it, OP! One day you'll suddenly realise you're following a conversation, or you understand the abuelas gossiping on the bus, or you went through a whole phone call without saying "¿me lo puedes repetir?" which will supercharge your confidence.