diff --git a/.env.example b/.env.example
new file mode 100644
index 0000000..9380d33
--- /dev/null
+++ b/.env.example
@@ -0,0 +1,7 @@
+# Create a .env file in root directory and add these values. You can simply copy it as cp .env.example .env
+# Then run docker compose -f docker-compose.dev.yml up to start postgres inside docker and run migrations if you want
+# Don't forget to add the same username, password and DB name to run backend api at /apps/api inside .env
+
+POSTGRES_DB=opensox
+POSTGRES_PASSWORD=opensox_dev_password
+POSTGRES_USER=opensox
diff --git a/README.md b/README.md
index d51d265..1eaf7b4 100644
--- a/README.md
+++ b/README.md
@@ -227,44 +227,16 @@ docker run -p 4000:4000 \
 
 Your API server will be available at `http://localhost:4000`.
 
-### Using Docker Compose (Optional)
-
-For a complete setup with PostgreSQL, you can create a `docker-compose.yml` file:
-
-```yaml
-version: '3.8'
-services:
-  postgres:
-    image: postgres:15
-    environment:
-      POSTGRES_USER: opensox
-      POSTGRES_PASSWORD: opensox
-      POSTGRES_DB: opensox
-    ports:
-      - "5432:5432"
-    volumes:
-      - postgres_data:/var/lib/postgresql/data
-
-  api:
-    build: .
-    ports:
-      - "4000:4000"
-    environment:
-      DATABASE_URL: postgresql://opensox:opensox@postgres:5432/opensox?schema=public
-      JWT_SECRET: your-secret-key
-      PORT: 4000
-      NODE_ENV: production
-    depends_on:
-      - postgres
-
-volumes:
-  postgres_data:
-```
+### Using Docker Compose for Database (Only)
 
-Then run:
+For a DB setup with PostgreSQL, cp .env.example .env in root directory with required variables, then run docker-compose.dev.yml
 
 ```bash
-docker-compose up -d
+cp .env.example .env
+```
+Then run,
+```bash
+docker-compose -f docker-compose.dev.yml up -d
 ```
 
 ## Our contributors
diff --git a/docker-compose.dev.yml b/docker-compose.dev.yml
new file mode 100644
index 0000000..9023682
--- /dev/null
+++ b/docker-compose.dev.yml
@@ -0,0 +1,18 @@
+
+services:
+  postgres:
+    image: postgres:18
+    env_file:
+      - .env
+    ports:
+      - "5432:5432"
+    volumes:
+      - opensox_postgres_data:/var/lib/postgresql
+    healthcheck:
+      test: ["CMD-SHELL", "pg_isready -U ${POSTGRES_USER}"]
+      interval: 10s
+      timeout: 5s
+      retries: 5
+
+volumes:
+  opensox_postgres_data: