Pretty much everyone wastes money on something. For some people that's phones, for others it's cars, or going out to eat, or whatever. If it's bringing you enjoyment that is greater than the cost in terms of your life energy spent to acquire the item, then it's all good.
That said, most people don't buy a new phone every year & those that do have figured out ways (selling their old ones, getting a discount from their carrier, leasing from Apple, etc) to defray the cost. I don't think that Apple intends for people to upgrade every year, but more like every two (although they certainly aren't complaining about those that do). They do need to come out with a new model every year though, and that's why you generally see somewhat incremental gains each year. If they only released a new phone every two years, the cash flow would be terrible, and no one would buy a new phone in month 22 of the cycle. But people are still getting a pretty noticeable upgrade every other cycle (going from a 4, to a 5 or a 4s to a 5s, for example).
It seems like I upgraded my iPhones more often back when they first came out (or first came to CDMA networks). But once they hit the 64 bit chips, they seem to hold up better for my uses, and I've been able to cut back on how often I upgrade without any major downsides.
