How do I update my iPhone?

If you mean update the system software, these articles outline two ways of making sure your device is running the newest version possible:

Update your iPhone, iPad, or iPod touch wirelessly. Click here --> Update your iPhone or iPad - Apple Support

Update your iPhone, iPad, or iPod touch with the Finder on a Mac computer --> Update your iPhone, iPad, or iPod touch with the Finder - Apple Support

If you really do mean upgrade the iPhone, the only way to do that is to buy a newer iPhone. No hardware modifications are possible.