diff --git a/MANUAL.md b/MANUAL.md
index 6af2d144a..9092e342c 100644
--- a/MANUAL.md
+++ b/MANUAL.md
@@ -107,14 +107,15 @@ Basic usage is:
     $ hledger [OPTIONS] COMMAND [FILTER PATTERNS]
 
 hledger first looks for data in a specially-formatted
-[journal file](#file-format).  You can specify the file with the -f
-option or the `LEDGER` environment variable; otherwise hledger assumes it
-is a file named `.journal` in your home directory. If the journal file
+[journal file](#file-format).  You can specify the file with the `-f`
+option or the `LEDGER_FILE` environment variable (`LEDGER` is also
+supported for backwards compatibility); otherwise hledger assumes it is a
+file named `.hledger.journal` in your home directory. If the journal file
 does not exist, it will be auto-created.
 
 To get started, save this
 [sample file](http://joyful.com/repos/hledger/data/sample.journal) as
-`.journal` in your home directory, or just run `hledger add` and enter
+`.hledger.journal` in your home directory, or just run `hledger add` and enter
 some transactions. Now try commands like these:
 
     $ hledger add                           # add some new transactions to the journal file
diff --git a/hledger-lib/Hledger/Read.hs b/hledger-lib/Hledger/Read.hs
index 2ba716bdc..750674774 100644
--- a/hledger-lib/Hledger/Read.hs
+++ b/hledger-lib/Hledger/Read.hs
@@ -38,8 +38,9 @@ import System.IO (hGetContents)
 #endif
 
 
-journalenvvar           = "LEDGER"
-timelogenvvar          = "TIMELOG"
+journalenvvar           = "LEDGER_FILE"
+journalenvvar2          = "LEDGER"
+timelogenvvar           = "TIMELOG"
 journaldefaultfilename  = ".journal"
 timelogdefaultfilename = ".timelog"
 
@@ -111,13 +112,19 @@ emptyJournal = do
 readJournal :: Maybe String -> String -> IO (Either String Journal)
 readJournal format s = journalFromPathAndString format "(string)" s
 
--- | Get the user's default journal file path.
+-- | Get the user's default journal file path. Like ledger, we look first
+-- for the LEDGER_FILE environment variable, and if that does not exist,
+-- for the legacy LEDGER environment variable. If neither exists, the path
+-- will be ".hledger.journal" in the users's home directory, or if we
+-- cannot determine that, in the current directory.
 myJournalPath :: IO String
 myJournalPath =
     getEnv journalenvvar `catch`
                (\_ -> do
-                  home <- getHomeDirectory `catch` (\_ -> return "")
-                  return $ home </> journaldefaultfilename)
+                  getEnv journalenvvar2 `catch`
+                             (\_ -> do
+                                home <- getHomeDirectory `catch` (\_ -> return "")
+                                return $ home </> journaldefaultfilename))
   
 -- | Get the user's default timelog file path.
 myTimelogPath :: IO String