su - postgres
create role <your_username> with createdb login password <your_password>

The above won't work due to root being disabled by default in Ubuntu. You'll have to set up root, or do the following

$ sudo -i -u postgres psql
postgres=# CREATE ROLE name_tealeaf WITH CREATEDB LOGIN PASSWORD 'password';

---

config/database.yml

development:
  adapter: postgresql
  encoding: unicode
  database: myapp_dev
  pool: 5
  username: <your_username>
  password: <your_password>

test:
  adapter: postgresql
  encoding: unicode
  database: myapp_test
  pool: 5
  username: <your_username>
  password: <your_password>

The above will cause a FATAL: Peer authentication error whenever you run bundle exec rake db:create:all. You need to add the host, see below

development:
  adapter: postgresql
  encoding: unicode
  database: myapp_dev
  host: localhost
  pool: 5
  username: <your_username>
  password: <your_password>

test:
  adapter: postgresql
  encoding: unicode
  database: myapp_test
  host: localhost
  pool: 5
  username: <your_username>
  password: <your_password>