Generally, when adding random code to your site using Wordpress, you would add it to your theme's functions.php file. However, in an effort to keep code more organized, Theme My Login provides you with the option of using a specific file for related code. This file is called theme-my-login-custom.php and it must reside in /wp-content/plugins. If this file does not exist, you will need to create it.
When theme-my-login-custom.php is present, it is always loaded when the plugin is loaded. This means that the earliest hook available within the file is the plugins_loaded action.