You want to avoid telling them your budget if possible, because then they know how much you have and when they offer you a guitar for that price, they'll think, "Why should I go lower? He said he has this much to spend!" The salesperson will probably ask you your budget. Don't lie to them, just be vague. Say something like, "Well, I'm interested in [whatever] guitars. What can you tell me about them?" If you ask them a question, they can't keep questioning you.
Here's another tip for you: don't go in there with your money. If you've got it on you you'll probably act differently. If you know you can't buy something on the spot, but you have the money for it saved, you'll come across as less eager, but not a time waster. This is the key. You know you want to buy the guitar, but they don't. You want to make it so they want to sell you the guitar. If they want you to buy it, then you're almost doing them the favour by making the purchase, right? Once you have them thinking this way you can start to negotiate.
The way to negotiate depends on your own personality and theirs. You don't want to act fake and pretend like you know what you're doing. There's nothing wrong with being blunt and saying something like, "I can get this guitar for [this much less] on eBay. What kind of deal can you offer me?" Of course, some people might get peeved if you came right out and said it like that, so, like I said first, everyone's a bit different and you need to approach them according to how they tick.
You can try a more subtle approach, too. So when they try to close the sale, you say something like, "Well, I really like that guitar, but I'm not sure if I want to spend that much . . . maybe I'll think about it." At this point a clever salesperson will either offer you a cheaper guitar, or ask exactly how much you have, or a monthly payment plan, or whatever. The idea is to stick to your guns and keep saying stuff along the lines of really liking that guitar, but not wanting to spend that much. You can hint that you might look around and see what other shops are willing to let them go for.
There are tons of books you can read about this kinda thing if you're really interested. It's impossible to outline them in a short reply. A good one is Influence: The Psychology of Persuasion.