Image Editor: In the content Explorer. You should see the Organize favorites button. Left click on the button and it will open the Organize Favorites dialog box.
Planner: In the Content Librarian. You will see the star button. If you left click on it. It will open up the Organize favorites dialog box.
Whether you are in Image Editor or Planner. The Organize Favorites box will look the same. You can create folders, rename them, move them or remove them from your favorites list.