#2 is wasteful way indeed!
but in low baud rates it will help, but in this case I don't think this is a low baud rate.
EDIT : I said for example 1ms, you really don't need it this fast, it depends on the frequency of getting bytes, for example for 20Hz you will have 20bytes every second which means you need a timer with at least 50ms refresh time and of course you read from serial port in asynchronous way then you can't 100% trust this way to read byte by byte, So as @JKSH said you better don't use this way if you don't have a specific reason.