Factory reset for every Cyanogenmod Update?

Generally speaking you don't have to perform a factory reset when downloading a newer build. The flashable zip should perform all wipes by itself if it is necessary (only certain partitions are affected - your data should be safe). Many developers include an OTA(Over-The-Air)Update Application so you can comfortably download and install the new build with 1-3 clicks. It depends on which device and which custom rom you are using.

In most cases you only have to perform a factory reset

1. when you're performing a fresh installation of CM


2. the android version changes(factory reset may not be needed but it is adviced most of the times)


3. when something goes wrong :)

The best thing to do is to make regular backups and save them on your computer - this way you won't loose much.