I would suggest an acoustic. 500 is a nice chunk o change but you will spend that alone on a nice electric. You want to make sure you buy an instrument you won't outgrow after the first year of playing. I think yamaha makes some nice acoustics and I also like alvarez acoustics. The MOST IMPORTANT THING is to go and play some of them at your local shop and see what feels good to you. Different companies build their guitars different. When picking out a new guitar, I always look at the width of the fretboard at the nut. I am 6'3" and have pretty big hands so this makes a big difference for me. Also look at the action also known as string height. This affects playability. Light strings are easier to play than mediums and that might help you too. Also, different brands of strings sound different on an acoustic. I tried a set of Dean Markley strings on my Martin and they killed my tone, so I went back to using Martin SP light strings. Love'em. Anyway, you can get a very nice acoustic for that kind of money, shop around.