import java.util.ArrayList;
import javax.swing.JOptionPane;


public class ClientList
{
    private ArrayList<Client> clientData;
    private final String    NEW_LINE = "\n";

    private int cursor;

    //manager mode
    public ClientList ( )
    {
        clientData = new ArrayList<Client> ( );
        buildClientList ( );

        if (clientData.size ( )  != 0)
            cursor = 0; //not empty, place cursor at the start of the vector
        else
            cursor = -1;    //empty

    }

    //manager mode
    public void buildClientList ( )
    {

        String textStream = new FileOperations ( ).readFile ( );
        JOptionPane.showMessageDialog (null, "client file loaded");

        //build the client list
        parseTextStream (textStream);
    }

    //build a vector from data read from a xml text file
    public void parseTextStream (String textStream)
    {
        int len = textStream.length ( );
        Client newClient = null;

        while (len != 0)
        {
            //get a line that ends with "\n"

            int pos = textStream.indexOf (NEW_LINE);
            if (pos == -1)
                break;

            String aLine = textStream.substring (0,pos);

            //the rest of the text stream
            textStream = textStream.substring (pos+1);
            len = textStream.length ( );

            aLine = aLine.trim ( );

            pos = aLine.indexOf ("<client>");
            if (pos != -1)
            {
                newClient = new Client ( ); //start of a client
                continue;   //skip the rest of the loop
            }

            pos = aLine.indexOf ("</client>");
            if (pos != -1)      //end of a client
            {
                clientData.add(newClient);  //append to the vector
                continue;
            }

            pos = aLine.indexOf ("<name>");
            if (pos != -1)
            {
                //extract what's between the start and end tags
                String newName = extractData ("<name>",aLine,"</name>");
                newClient.setName (newName);
                continue;
            }

            pos = aLine.indexOf ("<id>");
            if (pos != -1)
            {
                String newId = extractData ("<id>",aLine, "</id>");
                newClient.setId (newId);
                continue;
            }


            pos = aLine.indexOf ("<phone>");
            if (pos != -1)
            {
                String newPhone = extractData ("<phone>",aLine, "</phone>");
                newClient.setPhone (newPhone);
                continue;
            }

        } //end while


    } //end parseTextStream



    public String extractData (String startTag, String aLine, String endTag)
    {
        //remove start tag
        aLine = aLine.substring (startTag.length ( ));

        //look for end tag
        int pos = aLine.indexOf (endTag);
        //found
        if (pos != -1)
            return (aLine.substring (0,pos)).trim ( );
        else // end tag not found, return the rest of the line
            return aLine.trim ( );

    }


    public int getSize ( )
    {
        return clientData.size ( );
    }

    public int getCursor ( )
    {
            return cursor;
    }

    public Client getCurrent ( )
    {
        return clientData.get (cursor);
    }

    public Client getNext (  )
    {
        if (cursor != -1)
        {
            cursor = (cursor + 1) % clientData.size ( ); //wrap from rear to front
            return clientData.get (cursor);
        }
        else
            return null;
    }

    public Client getBack ( )
    {
        if (cursor != -1)
        {
            if (cursor == 0)
                cursor = clientData.size ( ) -1;  //wrap from front to rear
            else
                cursor--;
            return clientData.get (cursor);
        }
        else
            return null;
    }

    public void setCurrent (Client aClient)
    {
        clientData.set(aClient,cursor); //overwrite the current client
    }

    public void resetCursor ( )
    {
            if (cursor != -1)
                cursor = 0;
    }

    public String toString ( )
    {
        String outString = "<clients>" + NEW_LINE;

        int count = clientData.size ( );    //count of clients

        for (int i = 0; i < count; i++)
                outString += clientData.get (i);

        outString += ("</clients>" + NEW_LINE);

        return outString;
    }


}

getting following error
.\ClientList.java:164: error: no suitable method found for set(Client,int)
        clientData.set(aClient,cursor); //overwrite the current client
                  ^
    method List.set(int,Client) is not applicable
      (argument mismatch; Client cannot be converted to int)
    method AbstractList.set(int,Client) is not applicable
      (argument mismatch; Client cannot be converted to int)
    method ArrayList.set(int,Client) is not applicable
      (argument mismatch; Client cannot be converted to int)
1 error

Tool completed with exit code 1

The first parameter of ArrayList.set() is an integer. Client is clearly not an integer and so you are getting that error.

Look at this

It says ArrayList method set(int, element), the way you have it now is set(element, int)

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