Saute ham and onion in butter for 5 minutes or till onions are translucent. Add garlic and stir 30 seconds.
Cube potatoes, add to saucepan. Add water to pan and simmer 20 minutes or till potatoes are fork-tender.
Add milk and spices to pan.
Mix flour and water in a small dish, stirring briskly till smooth. Add slowly to saucepan, stirring soup as you add the flour mixture. Simmer soup till it is bubbly and thick. Add cheese if desired.