diff --git a/README.rst b/README.rst
index f8110cd4..d808b85b 100644
--- a/README.rst
+++ b/README.rst
@@ -25,16 +25,6 @@ you just have to run the following command::
 
 This will run a Flask app available at `http://localhost:5000`.
 
-It is also better to actually turn the debugging mode on when you're
-developing. You can create a `settings.py` file in the `budget` directory, with
-the following content::
-
-    DEBUG = True
-    SQLACHEMY_ECHO = DEBUG
-
-You can also set the `TESTING` flag to `True` so no mails are sent
-(and no exception is raised) while you're on development mode.
-
 Deploy it
 =========
 
@@ -62,13 +52,43 @@ With Nginx, Gunicorn and Supervisord
 
 Don't forget to set the right permission for your files !
 
-Also, create a `settings.py` file with the appropriate values if you need to
-use a different database for instance. You can also set `APPLICATION_ROOT` if
-you want to prefix your URLs to serve ihatemonney in the *folder* of a domain,
-e.g:
+Configure it
+============
+
+In a production environment
+---------------------------
+
+Make a copy of ``budget/default_settings.py`` and name it ``ihatemoney.cfg``.
+Then adjust the settings to your needs and move this file to
+``/etc/ihatemoney/ihatemoney.cfg``.
+This is the default path of the settings but you can also place it
+elsewhere and pass the configuration file path to the application using
+the IHATEMONEY_SETTINGS_FILE_PATH environment variable.
+e.g.::
+
+    $ export IHATEMONEY_SETTINGS_FILE_PATH="/path/to/your/conf/file.cfg"
+
+Note that you can also pass additional flask parameters with this file.
+e.g. If you want to prefix your URLs to serve ihatemonney in the *folder*
+of a domain, use the following: ::
 
     APPLICATION_ROOT='/budget'
 
+In a dev environment
+--------------------
+
+It is better to actually turn the debugging mode on when you're developing.
+You can create a ``settings.cfg`` file, with the following content::
+
+    DEBUG = True
+    SQLACHEMY_ECHO = DEBUG
+
+You can also set the `TESTING` flag to `True` so no mails are sent
+(and no exception is raised) while you're on development mode.
+Then before running the application, declare its path with ::
+
+    $ export IHATEMONEY_SETTINGS_FILE_PATH="$(pwd)/settings.cfg"
+
 The REST API?
 =============
 
diff --git a/budget/merged_settings.py b/budget/merged_settings.py
deleted file mode 100644
index f6b1f811..00000000
--- a/budget/merged_settings.py
+++ /dev/null
@@ -1,10 +0,0 @@
-"""
-Merges default settings with user-defined settings
-"""
-
-from default_settings import *
-
-try:
-    from settings import *
-except ImportError:
-    pass
diff --git a/budget/run.py b/budget/run.py
index 3ab036b2..00d43264 100644
--- a/budget/run.py
+++ b/budget/run.py
@@ -12,7 +12,7 @@ from api import api
 from utils import PrefixedWSGI
 from utils import minimal_round
 
-app = Flask(__name__)
+app = Flask(__name__, instance_path='/etc/ihatemoney', instance_relative_config=True)
 
 
 def pre_alembic_db():
@@ -27,8 +27,18 @@ def pre_alembic_db():
 def configure():
     """ A way to (re)configure the app, specially reset the settings
     """
-    config_obj = os.environ.get('FLASK_SETTINGS_MODULE', 'merged_settings')
-    app.config.from_object(config_obj)
+    default_config_file = os.path.join(app.root_path, 'default_settings.py')
+    config_file = os.environ.get('IHATEMONEY_SETTINGS_FILE_PATH')
+
+    # Load default settings first
+    # Then load the settings from the path set in IHATEMONEY_SETTINGS_FILE_PATH var
+    # If not set, default to /etc/ihatemoney/ihatemoney.cfg
+    # If the latter doesn't exist no error is raised and the default settings are used
+    app.config.from_pyfile(default_config_file)
+    if config_file:
+        app.config.from_pyfile(config_file)
+    else:
+        app.config.from_pyfile('ihatemoney.cfg', silent=True)
     app.wsgi_app = PrefixedWSGI(app)
 
     # Deprecations
diff --git a/budget/tests/ihatemoney.cfg b/budget/tests/ihatemoney.cfg
new file mode 100644
index 00000000..6345fcf4
--- /dev/null
+++ b/budget/tests/ihatemoney.cfg
@@ -0,0 +1,7 @@
+DEBUG = False
+SQLALCHEMY_DATABASE_URI = 'sqlite:///budget.db'
+SQLACHEMY_ECHO = DEBUG
+
+SECRET_KEY = "supersecret"
+
+MAIL_DEFAULT_SENDER = ("Budget manager", "budget@notmyidea.org")
diff --git a/budget/tests/ihatemoney_envvar.cfg b/budget/tests/ihatemoney_envvar.cfg
new file mode 100644
index 00000000..dbc078ee
--- /dev/null
+++ b/budget/tests/ihatemoney_envvar.cfg
@@ -0,0 +1,7 @@
+DEBUG = False
+SQLALCHEMY_DATABASE_URI = 'sqlite:///budget.db'
+SQLACHEMY_ECHO = DEBUG
+
+SECRET_KEY = "lalatra"
+
+MAIL_DEFAULT_SENDER = ("Budget manager", "budget@notmyidea.org")
diff --git a/budget/tests/tests.py b/budget/tests/tests.py
index 854c07b0..d979a299 100644
--- a/budget/tests/tests.py
+++ b/budget/tests/tests.py
@@ -10,14 +10,18 @@ import json
 from collections import defaultdict
 import six
 
-os.environ['FLASK_SETTINGS_MODULE'] = 'default_settings'
-
 from flask import session
 
+# Unset configuration file env var if previously set
+if 'IHATEMONEY_SETTINGS_FILE_PATH' in os.environ:
+    del os.environ['IHATEMONEY_SETTINGS_FILE_PATH']
+
 import run
 import models
 import utils
 
+__HERE__ = os.path.dirname(os.path.abspath(__file__))
+
 
 class TestCase(unittest.TestCase):
 
@@ -65,6 +69,40 @@ class TestCase(unittest.TestCase):
 
 class BudgetTestCase(TestCase):
 
+    def test_default_configuration(self):
+        """Test that default settings are loaded when no other configuration file is specified"""
+        run.configure()
+        self.assertFalse(run.app.config['DEBUG'])
+        self.assertEqual(run.app.config['SQLALCHEMY_DATABASE_URI'], 'sqlite:///budget.db')
+        self.assertFalse(run.app.config['SQLALCHEMY_TRACK_MODIFICATIONS'])
+        self.assertEqual(run.app.config['SECRET_KEY'], 'tralala')
+        self.assertEqual(run.app.config['MAIL_DEFAULT_SENDER'],
+                         ("Budget manager", "budget@notmyidea.org"))
+
+    def test_env_var_configuration_file(self):
+        """Test that settings are loaded from the specified configuration file"""
+        os.environ['IHATEMONEY_SETTINGS_FILE_PATH'] = os.path.join(__HERE__,
+                                                                   "ihatemoney_envvar.cfg")
+        run.configure()
+        self.assertEqual(run.app.config['SECRET_KEY'], 'lalatra')
+
+        # Test that the specified configuration file is loaded
+        # even if the default configuration file ihatemoney.cfg exists
+        os.environ['IHATEMONEY_SETTINGS_FILE_PATH'] = os.path.join(__HERE__,
+                                                                   "ihatemoney_envvar.cfg")
+        run.app.config.root_path = __HERE__
+        run.configure()
+        self.assertEqual(run.app.config['SECRET_KEY'], 'lalatra')
+
+        if 'IHATEMONEY_SETTINGS_FILE_PATH' in os.environ:
+            del os.environ['IHATEMONEY_SETTINGS_FILE_PATH']
+
+    def test_default_configuration_file(self):
+        """Test that settings are loaded from the default configuration file"""
+        run.app.config.root_path = __HERE__
+        run.configure()
+        self.assertEqual(run.app.config['SECRET_KEY'], 'supersecret')
+
     def test_notifications(self):
         """Test that the notifications are sent, and that email adresses
         are checked properly.