diff --git a/cmd/btcctl/config.go b/cmd/btcctl/config.go
index 339b2ed5..fbdb7790 100644
--- a/cmd/btcctl/config.go
+++ b/cmd/btcctl/config.go
@@ -175,20 +175,13 @@ func loadConfig() (*config, []string, error) {
 		RPCCert:    defaultRPCCertFile,
 	}
 
-	// Create the home directory if it doesn't already exist.
-	err := os.MkdirAll(btcdHomeDir, 0700)
-	if err != nil {
-		fmt.Fprintf(os.Stderr, "%v\n", err)
-		os.Exit(-1)
-	}
-
 	// Pre-parse the command line options to see if an alternative config
 	// file, the version flag, or the list commands flag was specified.  Any
 	// errors aside from the help message error can be ignored here since
 	// they will be caught by the final parse below.
 	preCfg := cfg
 	preParser := flags.NewParser(&preCfg, flags.HelpFlag)
-	_, err = preParser.Parse()
+	_, err := preParser.Parse()
 	if err != nil {
 		if e, ok := err.(*flags.Error); ok && e.Type == flags.ErrHelp {
 			fmt.Fprintln(os.Stderr, err)
@@ -282,9 +275,6 @@ func loadConfig() (*config, []string, error) {
 // For this it tries to read the btcd config file at its default path, and extract
 // the RPC user and password from it.
 func createDefaultConfigFile(destinationPath string) error {
-	// Create the destination directory if it does not exists
-	os.MkdirAll(filepath.Dir(destinationPath), 0700)
-
 	// Read btcd.conf from its default path
 	btcdConfigPath := filepath.Join(btcdHomeDir, "btcd.conf")
 	btcdConfigFile, err := os.Open(btcdConfigPath)
@@ -319,14 +309,22 @@ func createDefaultConfigFile(destinationPath string) error {
 		return nil
 	}
 
+	// Create the destination directory if it does not exists
+	err = os.MkdirAll(filepath.Dir(destinationPath), 0700)
+	if err != nil {
+		return err
+	}
+
 	// Create the destination file and write the rpcuser and rpcpass to it
-	dest, err := os.OpenFile(destinationPath, os.O_RDWR|os.O_CREATE|os.O_TRUNC, 0700)
+	dest, err := os.OpenFile(destinationPath,
+		os.O_RDWR|os.O_CREATE|os.O_TRUNC, 0600)
 	if err != nil {
 		return err
 	}
 	defer dest.Close()
 
-	dest.WriteString(fmt.Sprintf("rpcuser=%s\nrpcpass=%s", string(userSubmatches[1]), string(passSubmatches[1])))
+	dest.WriteString(fmt.Sprintf("rpcuser=%s\nrpcpass=%s",
+		string(userSubmatches[1]), string(passSubmatches[1])))
 
 	return nil
 }
diff --git a/config.go b/config.go
index 7dff0200..87d2df6f 100644
--- a/config.go
+++ b/config.go
@@ -52,18 +52,19 @@ const (
 	defaultMaxOrphanTransactions = 1000
 	defaultMaxOrphanTxSize       = 5000
 	defaultSigCacheMaxSize       = 100000
+	sampleConfigFilename         = "sample-btcd.conf"
 	defaultTxIndex               = false
 	defaultAddrIndex             = false
 )
 
 var (
-	btcdHomeDir        = btcutil.AppDataDir("btcd", false)
-	defaultConfigFile  = filepath.Join(btcdHomeDir, defaultConfigFilename)
-	defaultDataDir     = filepath.Join(btcdHomeDir, defaultDataDirname)
+	defaultHomeDir     = btcutil.AppDataDir("btcd", false)
+	defaultConfigFile  = filepath.Join(defaultHomeDir, defaultConfigFilename)
+	defaultDataDir     = filepath.Join(defaultHomeDir, defaultDataDirname)
 	knownDbTypes       = database.SupportedDrivers()
-	defaultRPCKeyFile  = filepath.Join(btcdHomeDir, "rpc.key")
-	defaultRPCCertFile = filepath.Join(btcdHomeDir, "rpc.cert")
-	defaultLogDir      = filepath.Join(btcdHomeDir, defaultLogDirname)
+	defaultRPCKeyFile  = filepath.Join(defaultHomeDir, "rpc.key")
+	defaultRPCCertFile = filepath.Join(defaultHomeDir, "rpc.cert")
+	defaultLogDir      = filepath.Join(defaultHomeDir, defaultLogDirname)
 )
 
 // runServiceCommand is only set to a real function on Windows.  It is used
@@ -153,7 +154,7 @@ type config struct {
 	minRelayTxFee        btcutil.Amount
 }
 
-// serviceOptions defines the configuration options for btcd as a service on
+// serviceOptions defines the configuration options for the daemon as a service on
 // Windows.
 type serviceOptions struct {
 	ServiceCommand string `short:"s" long:"service" description:"Service command {install, remove, start, stop}"`
@@ -164,7 +165,7 @@ type serviceOptions struct {
 func cleanAndExpandPath(path string) string {
 	// Expand initial ~ to OS specific home directory.
 	if strings.HasPrefix(path, "~") {
-		homeDir := filepath.Dir(btcdHomeDir)
+		homeDir := filepath.Dir(defaultHomeDir)
 		path = strings.Replace(path, "~", homeDir, 1)
 	}
 
@@ -440,7 +441,7 @@ func loadConfig() (*config, []string, error) {
 
 	// Create the home directory if it doesn't already exist.
 	funcName := "loadConfig"
-	err = os.MkdirAll(btcdHomeDir, 0700)
+	err = os.MkdirAll(defaultHomeDir, 0700)
 	if err != nil {
 		// Show a nicer error message if it's because a symlink is
 		// linked to a directory that does not exist (probably because
@@ -931,15 +932,21 @@ func loadConfig() (*config, []string, error) {
 // and populates it with some randomly generated RPC username and password.
 func createDefaultConfigFile(destinationPath string) error {
 	// Create the destination directory if it does not exists
-	os.MkdirAll(filepath.Dir(destinationPath), 0700)
+	err := os.MkdirAll(filepath.Dir(destinationPath), 0700)
+	if err != nil {
+		return err
+	}
 
-	// We get the sample config file path, which is in the same directory as this file.
-	_, path, _, _ := runtime.Caller(0)
-	sampleConfigPath := filepath.Join(filepath.Dir(path), "sample-btcd.conf")
+	// We assume sample config file path is same as binary
+	path, err := filepath.Abs(filepath.Dir(os.Args[0]))
+	if err != nil {
+		return err
+	}
+	sampleConfigPath := filepath.Join(path, sampleConfigFilename)
 
 	// We generate a random user and password
 	randomBytes := make([]byte, 20)
-	_, err := rand.Read(randomBytes)
+	_, err = rand.Read(randomBytes)
 	if err != nil {
 		return err
 	}
@@ -957,7 +964,8 @@ func createDefaultConfigFile(destinationPath string) error {
 	}
 	defer src.Close()
 
-	dest, err := os.OpenFile(destinationPath, os.O_RDWR|os.O_CREATE|os.O_TRUNC, 0700)
+	dest, err := os.OpenFile(destinationPath,
+		os.O_RDWR|os.O_CREATE|os.O_TRUNC, 0600)
 	if err != nil {
 		return err
 	}
diff --git a/config_test.go b/config_test.go
index 4083c544..e54a9f5f 100644
--- a/config_test.go
+++ b/config_test.go
@@ -5,6 +5,7 @@ import (
 	"os"
 	"path/filepath"
 	"regexp"
+	"runtime"
 	"testing"
 )
 
@@ -14,15 +15,39 @@ var (
 )
 
 func TestCreateDefaultConfigFile(t *testing.T) {
+	// find out where the sample config lives
+	_, path, _, ok := runtime.Caller(0)
+	if !ok {
+		t.Fatalf("Failed finding config file path")
+	}
+	sampleConfigFile := filepath.Join(filepath.Dir(path), "sample-btcd.conf")
+
 	// Setup a temporary directory
 	tmpDir, err := ioutil.TempDir("", "btcd")
 	if err != nil {
 		t.Fatalf("Failed creating a temporary directory: %v", err)
 	}
 	testpath := filepath.Join(tmpDir, "test.conf")
+
+	// copy config file to location of btcd binary
+	data, err := ioutil.ReadFile(sampleConfigFile)
+	if err != nil {
+		t.Fatalf("Failed reading sample config file: %v", err)
+	}
+	appPath, err := filepath.Abs(filepath.Dir(os.Args[0]))
+	if err != nil {
+		t.Fatalf("Failed obtaining app path: %v", err)
+	}
+	tmpConfigFile := filepath.Join(appPath, "sample-btcd.conf")
+	err = ioutil.WriteFile(tmpConfigFile, data, 0644)
+	if err != nil {
+		t.Fatalf("Failed copying sample config file: %v", err)
+	}
+
 	// Clean-up
 	defer func() {
 		os.Remove(testpath)
+		os.Remove(tmpConfigFile)
 		os.Remove(tmpDir)
 	}()
 
diff --git a/service_windows.go b/service_windows.go
index d5881873..be642ad5 100644
--- a/service_windows.go
+++ b/service_windows.go
@@ -37,7 +37,7 @@ var elog *eventlog.Log
 func logServiceStartOfDay(srvr *server) {
 	var message string
 	message += fmt.Sprintf("Version %s\n", version())
-	message += fmt.Sprintf("Configuration directory: %s\n", btcdHomeDir)
+	message += fmt.Sprintf("Configuration directory: %s\n", defaultHomeDir)
 	message += fmt.Sprintf("Configuration file: %s\n", cfg.ConfigFile)
 	message += fmt.Sprintf("Data directory: %s\n", cfg.DataDir)
 
diff --git a/upgrade.go b/upgrade.go
index 4140f41c..78bc6f2d 100644
--- a/upgrade.go
+++ b/upgrade.go
@@ -111,7 +111,7 @@ func upgradeDBPaths() error {
 func upgradeDataPaths() error {
 	// No need to migrate if the old and new home paths are the same.
 	oldHomePath := oldBtcdHomeDir()
-	newHomePath := btcdHomeDir
+	newHomePath := defaultHomeDir
 	if oldHomePath == newHomePath {
 		return nil
 	}