If I’m paying for extra storage why can’t I update my phone ???

You need to delete items physically on your phone. Whatever you delete will make space. Do note that if you are using iCloud Photo library if you delete your pictures on your iPhone they will also be deleted from iCloud.

Storage you pay for is iCloud Storage has no bearing on your iPhone's actual physical storage. You don't need to pay for more storage, because there is no way to increase the physical storage on your iPhone.

You can pay for more iCloud storage until you are blue in the face, it won;t change the amount of physical storage on your iPhone.

See here: How to check the storage on your iPhone, iPad, and iPod touch - Apple Support

Because you may not have enough free storage on your phone. iCloud storage is independent of iPhone storage.

If you need more space on your phone, you will need to delete something.