You can put the extra spacer above or below the stem, depending on where you want your handlebars to end up. (By the way, the stem can be flipped upside down if you want the handlebars higher.)

Whereever you put it, loosen the two pinch bolts on the back of the stem, install the spacers and stem how you want it, adjust the pre-load bolt at the center of the cap above the stem to where it is tight enough to remove any play in the headset but loose enough that it doesn't bind, straighten the stem so it is parallel with the front wheel, and then tighten the stem pinch bolts. It is essential that the bearing pre-load be set before the pinch bolts are tightened.